Deutsche Bank has agreed to a $7.2 billion settlement with the US department of justice over its sale and pooling of toxic mortgage securities in the run-up to the 2008 financial crisis. 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 US housing market collapse.
The department sued Barclays on Thursday over similar claims, after having reached $46 billion in settlements with US 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.