Deutsche Bank AG says it does not intend to pay $14 billion to settle civil claims with the U.S. Department of Justice for its handling of residential mortgage-backed securities and related transactions.

The bank confirmed Friday in a statement that the Justice Department had proposed a settlement of $14 billion and asked the German bank to make a counter proposal.

It described the proposed amount as an "opening position" put forward by the Justice Department in negotiations that were just beginning.

Deutsche Bank is among many financial institutions investigated over dealings in shoddy mortgages in the run-up to the 2008 crisis that led millions of Americans to lose their jobs and sometimes their homes.

The government has accused the banks of misleading investors about the quality of their loans. </s> The U.S. Department of Justice is asking Deutsche Bank to pay $14 billion to settle an investigation into its selling of mortgage-backed securities. As Sara Hemrajani reports, the claim far outstrips the bank's and investors' expectations. </s> Deutsche Bank has agreed to pay the US Department of Justice $7.2bn (£6bn) over misleading investors with sales of mortgage-backed securities in the run-up to the financial crisis.

The bank provisionally agreed the settlement amount in December, but it was only finalised today.

Deutsche Bank will pay a civil penalty of $3.1bn and provide $4.1bn in consumer relief, such as loan forgiveness, as part of its payment.

Read more: Deutsche Bank chief blames regulation for lack of banking innovation

“This $7.2bn resolution – the largest of its kind – recognises the immense breadth of Deutsche Bank’s unlawful scheme by demanding a painful penalty from the bank, along with billions of dollars of relief to the communities and homeowners that continue to struggle because of Wall Street’s greed,” said principal deputy associate attorney general Bill Baer.

“The department will remain relentless in holding financial institutions accountable for the harm their misconduct inflicted on investors, our economy and American consumers.”

Read more: Deutsche Bank's head of financial crime quits after just six months

Settling the mortgage-securities case would mean Deutsche Bank has shaken off one legal headache – however, other major probes remain.

Deutsche faces investigations into suspicious equities trades in Russia, as well as alleged violations of US sanctions on Iran and other countries. </s> Deutsche Bank agreed on Tuesday to pay $7.2 billion for misleading investors in its sale or residential mortgage-backed securities.



The U.S. Justice Department said the settlement requires the bank to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act.

It will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.



"This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public," Attorney General Loretta Lynch said in a release.



This story is developing. Please check back for further updates.

Click here for the latest on the markets. </s> Deutsche Bank has cemented a $7.2 billion settlement with the Department of Justice for selling toxic mortgage-backed securities in the years before the market meltdown of 2008.

The DOJ said Tuesday that the settlement -- which includes a $3.1 billion civil penalty -- is the largest of its kind levied by the department.

The other $4.1 billion included in the settlement is earmarked for "relief to underwater homeowners, distressed borrowers and affected communities," DOJ said in a statement. That includes issuing loan forgiveness and forbearance and providing funding for affordable housing across the U.S., to be overseen by an independent monitor.

"Deutsche Bank did not merely mislead investors: It contributed directly to an international financial crisis," Attorney General Loretta Lynch said.

"Our conduct in this matter falls short of our standards and is unacceptable," said Deutsche Bank (DB) CEO John Cryan. "We apologize unreservedly for it. We have subsequently exited many of the underlying activities and comprehensively improved our standards."

The deal was first announced in December, but Tuesday marked the formal closure of the settlement.

The DOJ has spent the years since the 2008 financial crisis going after banks that were involved in dicey trading practices. Deutsche Bank (DB), like many of its competitors, was found to have packaged up poor-quality mortgage bonds into securities that looked like trustworthy investments.

The DOJ has levied more than $60 billion in fines over the toxic mortgages that plunged the world into a recession back in 2008. Among the other banks fined include JP Morgan (JPM), $13 billion; Bank of America (BAC), $16.7 billion; Goldman Sachs (GS), $5.1 billion; and Citigroup (C), $7 billion. </s> NEW YORK/FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE) has agreed to a $7.2 billion settlement with the U.S. Department of Justice over its sale and pooling of toxic mortgage securities in the run-up to the 2008 financial crisis.

A logo is pictured on the Deutsche Bank building in Geneva, Switzerland, October 11, 2016. REUTERS/Denis Balibouse

The agreement in principle, announced by Deutsche Bank’s Frankfurt headquarters early Friday morning, offers some relief to the German lender, whose stock was hit hard in September after it acknowledged the Justice Department had been seeking nearly twice as much.

It also highlights the Justice Department’s recent efforts to hold European banks accountable for shoddy securities that contributed to the U.S. housing market collapse.

The department sued Barclays PLC (BARC.L) on Thursday over similar claims, after having reached $46 billion in settlements with U.S. banks over the last three years.

Deutsche Bank does not plan a capital increase to cover the settlement, a person close to the bank said. The lender expects the agreement to be finalized in early 2017, before President-elect Donald Trump takes office, said the source, who spoke on the condition of anonymity.

Deutsche does expect to record a pretax charge of about $1.17 billion in its fourth quarter because of the civil monetary penalty, according to its press release.

As part of the agreement, Deutsche Bank would pay a civil monetary penalty of $3.1 billion and provide $4.1 billion in consumer relief, such as loan forgiveness. The bank cautioned that there is “no assurance” the two sides will agree on the final documents.

A spokesman for the Justice Department declined to comment.

Settling the mortgage-securities case would mean Deutsche Bank has shaken off one legal headache. Three major probes remain.

Deutsche faces investigations into the alleged manipulation of foreign exchange rates, suspicious equities trades in Russia, as well as alleged violations of U.S. sanctions on Iran and other countries.

Since 2012, Deutsche Bank has already paid more than 12 billion euros for litigation, including a deal with U.S. mortgage-finance giants Fannie Mae and Freddie Mac.

Deutsche Bank’s “troubling practices” were widespread, including when trader Greg Lippmann told colleagues that many home loans the bank was packaging into securities were “crap” and “pigs,” according to a 2011 U.S. Senate subcommittee report.

Lippmann has declined to comment on the report.

There has been fear among investors, companies and regulators that the penalties are too much for Deutsche Bank to withstand.

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 stock has recovered substantially, but is down from the beginning of 2016.

OTHER BANKS

The Justice Department is still pursuing mortgage allegations against other lenders in addition to Barclays.

Credit Suisse Group AG (CSGN.S) is in late-stage negotiations and has resisted a demand by the agency that it pay between $5 billion and $7 billion over its sale of mortgage securities, sources have said.

Royal Bank of Scotland Group PLC (RBS.L), Wells Fargo & Co (WFC.N), UBS Group AG (UBSG.S) and HSBC (HSBA.L) are also under investigation, according to company disclosures.

U.S. banks have paid tens of billions of dollars over the past three years to settle with U.S. authorities over misleading investors about the quality of mortgages underlying securities.

In 2013, JPMorgan Chase & Co (JPM.N) agreed to pay $13 billion. The following year, Bank of America Corp (BAC.N) agreed to pay $16.65 billion, while Citigroup (C.N) cut a deal for $7 billion. In February this year, Morgan Stanley (MS.N) agreed to pay $2.6 billion, and in April, Goldman Sachs Group Inc (GS.N) negotiated a $5 billion deal.

Deutsche is not the first bank to announce a settlement amount before both sides have agreed on the final documentation. Morgan Stanley disclosed its agreement a year before it was finalized and formally announced. </s> US officials on Tuesday formally announced a $7.2 billion settlement with the German lender Deutsche Bank, adding to a flurry of last-minute corporate resolutions by the outgoing administration of President Barak Obama.

The announcement by the US Department of Justice came almost a month after the terms of the settlement had been unveiled by the bank itself. In a statement, the department said the resolution was the largest settlement so far over the conduct of any single entity contributing to the 2008 financial meltdown.

"Deutsche Bank did not merely mislead investors: It contributed directly to an international financial crisis," US Attorney General Loretta Lynch said in a statement.

The widespread failure of complex securities that re-bundled poor quality mortgages caused successive crises and bankruptcies in the financial sector in 2008, leading to the Great Recession.

In a civil case, US prosecutors said the bank had contributed to the 2008 financial meltdown by misleading investors as it repackaged and sold residential mortgage-backed securities between 2006 and 2007.

The bank will pay a $3.1 billion civil penalty and contribute $4.1 billion to support relief for borrowers and homeowners. The bank admits to deceiving investors about the loans underlying the securities it sold, including by falsely claiming that the loans had been reviewed.

Bank employees accepted blocked out pay stubs which concealed borrower incomes and thus hid their true ability to pay; failed to inform investors that a significant share of borrowers had liens on the properties; and cleared loans that the bank's diligence team had attempted to block or that were based on fraudulent property appraisals.

"Deutsche Bank enriched itself by paying reduced prices for risky loans while representing to investors valuation metrics based on appraisals the bank knew to be inflated," the Justice Department statement said.

Other enforcement actions against major companies announced since December 23, include a $5.3 billion settlement with Credit Suisse and an $864 million settlement with the ratings agency Moody's, both over the mortgage crisis, as well as a $1 billion action against the Japanese maker of defective airbags Takata.

The Justice department this month also announced a $4.3 billion settlement over Volkswagen's emissions cheating scandal and $170 million settlement with the British aerospace and power systems contractor Rolls Royce, part of an $800 global settlement with British, US and Brazilian authorities over allegations of corruption in at least six countries around the world. </s> The claim against Deutsche, which is likely to be negotiated in several months of talks, far outstrips the bank's and investors' expectations for such costs.

While it is yet to become clear what the final payment will be, if it were to be as high as $14 billion, this would be a severe strain for Deutsche's fragile finances and would likely further rock investor confidence in the bank.

"Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. 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 in a statement on Friday.

The Department of Justice declined to comment.

The Department of Justice has taken a tough stance in settlement negotiations with other banks, requesting sums higher than the eventual fine.

In 2014, it asked Citigroup ( ) to pay $12 billion to resolve an investigation into the sale of shoddy mortgage-backed securities, sources said. The fine eventually came in at $7 billion.

In a similar case, rival Goldman Sachs ( ) agreed in April to pay $5.06 billion to settle claims that it misled mortgage bond investors during the financial crisis.

That settlement included a $2.39 billion civil penalty, $1.8 billion in other relief, including funds for homeowners whose mortgages exceed the value of their property, and an $875 million payment to resolve claims by cooperative and home loan banks among others.

Deutsche Bank's settlement will comprise a different list of recipients, a source close to the matter said, adding that the lender had already settled some claims three years ago.

In late 2013, Deutsche Bank agreed to pay $1.9 billion to settle claims that it defrauded U.S. government-controlled Fannie Mae and Freddie Mac, America's biggest providers of housing finance, into buying $14.2 billion in mortgage-backed securities before the 2008 financial crisis.

A $14 billion fine, or even half that sum, would still rank among one of the largest paid by banks to U.S. authorities in recent years. In 2013, JPMorgan Chase & Co ( ) agreed to pay $13 billion to settle allegations by the U.S. authorities that it overstated the quality of mortgages it was selling to investors in the run-up to the 2008-2009 financial crisis. In 2014, Bank of America Corp. ( ) agreed to pay $16.7 billion in penalties to settle similar charges.

Deutsche Bank has not said what it has set aside in anticipation of a settlement over the sale and packaging of resident mortgage-backed securities before 2008. Its overall legal provisions stood at 5.5 billion euros at the end of the second quarter.

Deutsche was once one of Europe's most successful players on Wall Street. Like many of its peers, it has since faced a slew of lawsuits that often trace back to the boom years before the crash. Its litigation bill since 2012 has already hit more than 12 billion euros.

Claims filed by individuals, companies and regulators against Deutsche, outlined in the bank's 2015 annual report, relate to mis-selling of subprime loans and manipulation of foreign exchange rates or gold and silver prices. Other lawsuits are for the rigging of borrowing benchmarks Libor and Euribor, used to set the price of mortgages and derivatives.

In July, Chief Executive John Cryan said he hoped to close the four largest remaining litigation cases this year.

These are the mortgages and FX cases, an investigation into suspicious equities trades in Russia and allegations of money laundering. </s> NEW YORK: Deutsche Bank has signed a US$7.2 billion settlement with the U.S. Department of Justice over its sale and pooling of toxic mortgage securities in the run-up to the 2008 financial crisis, the government agency said on Tuesday.

The Frankfurt-based bank announced it had reached the agreement in principle with U.S. authorities on Dec. 23. The agreement offered some relief to the German lender, whose stock price was hit hard in September after it acknowledged the Justice Department had been seeking nearly twice as much.

As part of the final agreement, Deutsche Bank will pay a civil monetary penalty of US$3.1 billion and provide US$4.1 billion in consumer relief to homeowners, borrowers and communities harmed by its practices.
The Obama administration through the U.S. Justice Department seeks a fine of $14 billion against Deutsche Bank in regards to mortgage securities.