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| Deutsche Bank and Credit Suisse agree multibillion-dollar settlements with US Deutsche Bank and Credit Suisse agree multibillion-dollar settlements with US | |
| (about 1 hour later) | |
| The US Department of Justice has extracted multibillion-pound settlements from Deutsche Bank and Credit Suisse for a decade-old toxic bond mis-selling scandal. | The US Department of Justice has extracted multibillion-pound settlements from Deutsche Bank and Credit Suisse for a decade-old toxic bond mis-selling scandal. |
| At the same time, it has issued legal action against Barclays, which, in an unprecedented move, has refused to settle with the authorities. | At the same time, it has issued legal action against Barclays, which, in an unprecedented move, has refused to settle with the authorities. |
| Deutsche, Germany’s biggest bank, will pay $7.2bn (£5.9bn) to the DoJ. This is considerably less than the $14bn that had originally been demanded but higher than analysts had expected. Credit Suisse has agreed to pay $5.3bn. | Deutsche, Germany’s biggest bank, will pay $7.2bn (£5.9bn) to the DoJ. This is considerably less than the $14bn that had originally been demanded but higher than analysts had expected. Credit Suisse has agreed to pay $5.3bn. |
| The DoJ did not disclose the size of penalty it wanted to levy on Barclays but accused the bank of “plainly irresponsible and dishonest” conduct. | The DoJ did not disclose the size of penalty it wanted to levy on Barclays but accused the bank of “plainly irresponsible and dishonest” conduct. |
| The flurry of announcements come weeks before Donald Trump takes over as US president and follow months of negotiation between the banks and the DoJ, led by Loretta Lynch, the US attorney general. | The flurry of announcements come weeks before Donald Trump takes over as US president and follow months of negotiation between the banks and the DoJ, led by Loretta Lynch, the US attorney general. |
| The scandal dates back to 2005 and 2007, when banks packaged up home loans and sold them on to investors. The penalties are part of an effort by outgoing president Barack Obama to hold banks accountable. | The scandal dates back to 2005 and 2007, when banks packaged up home loans and sold them on to investors. The penalties are part of an effort by outgoing president Barack Obama to hold banks accountable. |
| These are the first settlements with non-US banks – JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch and Citi have all been punished. There are further penalties to come, notably for Royal Bank of Scotland. The bailed-out bank could face a bill of as much as £9bn, analysts have warned. | These are the first settlements with non-US banks – JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch and Citi have all been punished. There are further penalties to come, notably for Royal Bank of Scotland. The bailed-out bank could face a bill of as much as £9bn, analysts have warned. |
| Much of the focus will be on Deutsche, run by the UK’s John Cryan, which has been fighting the authorities’ original attempt to impose a $14bn fine. When news of that first leaked, the German bank’s shares plunged to 31-year lows amid fears about its ability to withstand such a high bill. | Much of the focus will be on Deutsche, run by the UK’s John Cryan, which has been fighting the authorities’ original attempt to impose a $14bn fine. When news of that first leaked, the German bank’s shares plunged to 31-year lows amid fears about its ability to withstand such a high bill. |
| Deutsche was forced to make clear in September that it would not need help from Angela Merkel’s government with the potential fine. | Deutsche was forced to make clear in September that it would not need help from Angela Merkel’s government with the potential fine. |
| Shares in Deutsche rose 4% after the news on relief over the scale of the penalty, but some analysts say it may still need to raise fresh funds. | Shares in Deutsche rose 4% after the news on relief over the scale of the penalty, but some analysts say it may still need to raise fresh funds. |
| “Positively, the deal is settled and out of the way, as it was thought that the issue could drag on into 2017,” said Thomas Kinmonth, an analyst at ABN Amro. “On the negative side, the amount of the fine does lead us to believe that a cash call will have to be performed before 2019.” | “Positively, the deal is settled and out of the way, as it was thought that the issue could drag on into 2017,” said Thomas Kinmonth, an analyst at ABN Amro. “On the negative side, the amount of the fine does lead us to believe that a cash call will have to be performed before 2019.” |
| However, the bank might be able to avoid a cash call if it were to sell off parts of its business or if there were a significant change to the way in which it operates, he said. | However, the bank might be able to avoid a cash call if it were to sell off parts of its business or if there were a significant change to the way in which it operates, he said. |
| Deutsche’s shares have been pummelled on stock markets during 2016 over fears about its financial position. It had already set aside billions of euros in anticipation of the fine and in the early hours of Friday said it expected to take another hit of $1.2bn in its fourth quarter. | Deutsche’s shares have been pummelled on stock markets during 2016 over fears about its financial position. It had already set aside billions of euros in anticipation of the fine and in the early hours of Friday said it expected to take another hit of $1.2bn in its fourth quarter. |
| Under the settlement, Deutsche Bank will pay $3.1bn and provide $4.1bn in compensation to customers. Credit Suisse will pay $2.5bn and compensation of $2.8 bn over five years. | Under the settlement, Deutsche Bank will pay $3.1bn and provide $4.1bn in compensation to customers. Credit Suisse will pay $2.5bn and compensation of $2.8 bn over five years. |
| Barclays is the first bank to fail to reach a settlement and now faces lengthy court proceedings in New York to defend itself. | Barclays is the first bank to fail to reach a settlement and now faces lengthy court proceedings in New York to defend itself. |
| It said in a statement: “Barclays rejects the claims made in the complaint. Barclays considers that the claims made in the complaint are disconnected from the facts. We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity.” | It said in a statement: “Barclays rejects the claims made in the complaint. Barclays considers that the claims made in the complaint are disconnected from the facts. We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity.” |
| The DoJ did not comment on the announcements by Deutsche and Credit Suisse but as it filed legal papers against Barclays, Lynch said: “Financial institutions like Barclays occupy a position of vital public trust. Ordinary Americans depend on their assurances of transparency and legitimacy, and entrust these banks with their valuable savings. | The DoJ did not comment on the announcements by Deutsche and Credit Suisse but as it filed legal papers against Barclays, Lynch said: “Financial institutions like Barclays occupy a position of vital public trust. Ordinary Americans depend on their assurances of transparency and legitimacy, and entrust these banks with their valuable savings. |
| “As alleged in this complaint, Barclays jeopardised billions of dollars of wealth through practices that were plainly irresponsible and dishonest. 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. | “As alleged in this complaint, Barclays jeopardised billions of dollars of wealth through practices that were plainly irresponsible and dishonest. 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. |