Deutsche, Credit Suisse In $12bn Settlements

Deutsche Bank said it reached a settlement in principle with the US Department of Justice (DoJ) regarding civil claims in connection with the bank’s issuance and underwriting of residential mortgage-backed securities (RMBS) and related securitization between 2005 and 2007.

Deutsche Bank agreed to pay a civil monetary penalty of $3.1 billion and provide $4.1 billion in consumer relief in the United States.

Credit Suisse also said it reached a settlement in principle with the DOJ related to its legacy RMBS business, agreeing to pay the DOJ a civil monetary penalty of $2.48 billion and provide consumer relief totaling $2.8 billion over five years.

Deutsche Bank said: “The consumer relief is expected to be primarily in the form of loan modifications and other assistance to homeowners and borrowers, and other similar initiatives to be determined, and delivered over a period of at least five years.

“The settlement is subject to the negotiation of definitive documentation, and there can be no assurance that the US Department of Justice and the bank will agree on the final documentation.”

Deutsche Bank said it expects to record pre-tax charges of approximately $1.17 billion in the financial results for the fourth quarter as a consequence of the civil monetary penalty.

“The financial consequences, if any, of the consumer relief are subject to the final terms of the settlement, and are not currently expected to have a material impact on 2016 financial results,” added Deutsche Bank.

Credit Suisse said its settlement would release it from potential civil claims by the DOJ related to its securitization, underwriting and issuance of RMBS.

“This settlement is subject to the negotiation of final documentation and approval by the Credit Suisse board of directors,” said Credit Suisse.

“Credit Suisse will take a pre-tax charge of approximately USD 2 billion in addition to its existing reserves against these matters.

“This will be taken in our 4Q 2016 financial results.”

Meanwhile, Barclays said it rejects claims made in a complaint against it by the DoJ in the US District Court for the Eastern District of New York.

“The complaint relates to the DoJ’s investigation of certain activities of Barclays in respect of US residential mortgage-backed securities in the period 2005-2007,” said Barclays.

“The complaint is a civil claim that makes a number of allegations, including mail and wire fraud.

“Amongst other relief, the complaint seeks unspecified monetary penalties.

“Barclays rejects the claims made in the complaint.

“Barclays considers that the claims made in the complaint are disconnected from the facts.

“Barclays will vigorously defend the complaint and intends to seek its dismissal at the earliest opportunity.”

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