Compliance

Deutsche Bank Reaches Official $7.2 Billion Settlement With US Department Of Justice

Josh O'Neill, Assistant Editor, January 18, 2017

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The US Department of Justice originally sought a penalty of $14 billion from the German lender.

Deutsche Bank will pay $7.2 billion to settle a case with the US Department of Justice over its sale of toxic mortgage securities in the run-up to the 2008 financial tsunami, the government agency said earlier this week. 

The colossal fine represents the largest resolution for the conduct of a single entity in misleading investors in residential mortgage-backed securities, the DoJ said in a statement. Previously, the biggest penalty was paid by Citigroup in 2014, which amounted to $7 billion.

“Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis. The cost of this misconduct is significant: Deutsche Bank will pay a $3.1 billion civil penalty, and provide an additional $4.1 billion in relief to homeowners, borrowers, and communities harmed by its practices. Our settlement makes clear that institutions like Deutsche Bank cannot evade responsibility for the great cost exacted by their conduct,” said attorney general Loretta Lynch. 

At the time of writing, the bank's stock price was down 0.74 per cent.

John Cryan, Deutsche Bank's chief executive, said that the firm's conduct between 2005 and 2007 fell short of standards and was "unacceptable". He said the bank had exited many of the underlying activities and improved standards. 

The Frankfurt-headquartered lender announced it had reached the agreement in principle with US authorities on December 23 of last year.

In September 2016, the bank's stock price hit a record low after the bank acknowledged the DoJ's opening demand of $14 billion. 

Earlier this month, Deutsche Bank agreed to pay $95 million to settle a US government lawsuit alleging the group committed tax fraud for using shell companies to conceal significant tax liabilities from the Internal Revenue Service in 2000.

Since the announcement, the German banking behemoth has moved to curtail the use of electronic messaging services by its employees, but said the decision was not a result of a regulatory order.

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