- Title: U.S. hits Credit Suisse, Deutsche Bank with toxic debt penalties
- Date: 23rd December 2016
- Summary: LONDON, ENGLAND, UK (FILE) (REUTERS) VARIOUS OF CREDIT SUISSE OFFICES FRANKFURT, GERMANY (FILE - MAY 19, 2014) (REUTERS) VARIOUS EXTERIORS OF DEUTSCHE BANK'S HEADQUARTERS LONDON, ENGLAND, UK (FILE) (REUTERS) (SOUNDBITE) (English) LONDON CAPITAL GROUP, SENIOR MARKETS ANALYST, JASPER LAWLER, SAYING: "Obviously it's a big amount of money but if you dig into the details here, what is actually a quite good result for Deutsche Bank is that the way the funds will be distributed, some of it will be going to fine, some of it is going towards customer relief. That should mean that rather than having to put all of that 7 billion towards paying off the fines immediately, the other remaining 4 billion in customer relief, that's going to be a bit more of a trickle over time through the form of perhaps easing off on interest rates on certain products, just making it easier for certain customers. That will mean it doesn't face quite the immediate hit. And obviously it's just a lot less than the original 14 billion that sent the share price down below 10 euros, we're back above 16 euros at this point, looking a little bit safer for Deutsche going forward, and I think just that general safer outlook is what investors are reacting to." FRANKFURT, GERMANY (FILE - MAY 19, 2014) (REUTERS) VARIOUS EXTERIORS OF DEUTSCHE BANK'S HEADQUARTERS LONDON, ENGLAND, UK (FILE) (REUTERS) (SOUNDBITE) (English) LONDON CAPITAL GROUP, SENIOR MARKETS ANALYST, JASPER LAWLER, SAYING: "This just means that any profits that these banks would have made perhaps as we head into a higher interest rate environment, are going to be put aside for provisions for fines instead of being handed back towards shareholders and reinvestment in the business. So that just delays the recovery but the silver lining here, it just puts one more fine behind them and gets them one step closer to getting over the problems associated with the pre-financial crisis era and on the road towards profitability, but that road is still a little bit far off at this point." FRANKFURT, GERMANY (FILE - 2010) (REUTERS) VARIOUS EXTERIORS OF POSTBANK HEADQUARTERS
- Embargoed: 7th January 2017 12:29
- Keywords: U.S. hits Credit Suisse Deutsche Bank toxic debt penalties
- Location: LONDON, ENGLAND, UK , FRANKFURT, GERMANY
- City: LONDON, ENGLAND, UK , FRANKFURT, GERMANY
- Country: Various
- Topics: Company News Markets,Economic Events
- Reuters ID: LVA0015E3T6DP
- Aspect Ratio: 16:9
- Story Text:Credit Suisse and Deutsche Bank have been hit with a combined penalty of more than $12 billion over the sale of U.S. toxic debt, further hampering two of Europe's leading investment banks as they grapple with falling profits.
The penalty puts them at a further disadvantage to larger U.S. rivals.
Credit Suisse agreed in principle to pay U.S. authorities $2.48 billion to settle claims it misled investors in residential mortgage-backed securities it sold in the run-up to the 2008 financial crisis, the Swiss bank said on Friday (December 23).
Credit Suisse will also provide $2.8 billion from the settlement over five years to offset the impact on consumers, it said in a statement, adding the deal was subject to negotiation of final documentation and approval by its board of directors.
The final deal is in line with the $5 billion-$7 billion the U.S. Department of Justice (DOJ) had asked Credit Suisse to pay earlier in negotiations, as reported by Reuters on Monday.
The news came after Deutsche Bank agreed to a $7.2 billion settlement with the DOJ over its sale and pooling of toxic mortgage securities.
The agreement in principle, announced by Deutsche Bank's Frankfurt headquarters early on 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.
"Obviously it's a big amount of money but if you dig into the details here, what is actually a quite good result for Deutsche Bank is that the way the funds will be distributed, some of it will be going to fine, some of it is going towards customer relief. That should mean that rather than having to put all of that 7 billion towards paying off the fines immediately, the other remaining 4 billion in customer relief, that's going to be a bit more of a trickle over time through the form of perhaps easing off on interest rates on certain products, just making it easier for certain customers" said Jasper Lawler, Senior Market Analyst, London Capital Group.
The deals are the latest the Justice Department has reached with major financial institutions since U.S. President Barack Obama's 2012 initiative to hold Wall Street accountable for misconduct in the mortgage securities market that helped lead to the worst financial crisis since the Great Depression.
The department sued Barclays PLC on Thursday over similar claims.
Barclays said on Friday that it rejected the DoJ's complaint, would "vigorously defend" the case and sought its dismissal "at the earliest opportunity".
Credit Suisse had paid a $2.8 billion fine in 2014 for helping wealthy Americans evade tax.
Credit Suisse in November said it had upped litigation provisions by 357 million francs ($348.29 million), mainly in connection with mortgage-related matters.
Its shares were indicated 2.4 percent higher in pre-market trading. - Copyright Holder: FILE REUTERS (CAN SELL)
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