FRANKFURT, April 14 (Reuters) - Deutsche Bank shares and its reputation came under pressure after a U.S. senate report said the German lender contributed to 'the mortgage mess', as regulators seek some redress for the financial crisis.
Deutsche Bank shares were down 3 percent at 41.40 euros by 1141 GMT, making them the weakest performer on the German blue-chip index, which was down 0.7 percent.
Markus Huber, the head of German Sales Trading at ETX Capital, said the stock was falling because of the 'U.S. investigation of Deutsche's role, in addition to a downgrade by Societe Generale'.
The U.S. senate report on the financial crisis, published on Wednesday by the U.S. Senate Subcommittee on Investigations, criticised Goldman Sachs, Deutsche Bank, the former Washington Mutual Bank, the U.S. Office of Thrift Supervision and credit rating agencies Moody's and Standard & Poor's.
'We will be referring this matter to the Justice Department and to the SEC (Securities and Exchange Commission),' Senator Carl Levin said. A spokesman later said that the subcommittee had no plans to release details of any referral.
Analysts were unsure of the impact given the vague nature of the remarks by U.S. Senators about what the implications could be, but the move back into the crosshairs of regulators is certainly no benefit.
'It's not good for their image to be in the headlines in this context,' said Wolfgang Gerke, a Professor of Finance, at the Bavarian Financial Center. 'But it's also not surprising given the mood among regulators and Deutsche Bank's position in the market alongside Goldman.'
More than 120 new documents provide insights into how Deutsche Bank contributed to the 'mortgage mess' the report said, referring to the contamination of the U.S. financial system with toxic mortgages.
The documents detail how Deutsche Bank helped assemble a $1.1 billion collateralised debt obligation (CDO) known as Gemstone 7, stood by as it was filled with low-quality assets that its top CFO trader referred to as 'crap' and 'pigs', and rushed to sell it 'before the market falls off a cliff'.
Deutsche Bank lost $4.5 billion when the mortgage market collapsed, but would have lost even more if it had not cut its losses by selling CDOs like Gemstone, the report said.
Deutsche Bank said, 'As the report correctly states, there were divergent views within the bank about the U.S. housing market. However, the banks views were fully communicated to the market through research reports, industry events, trading desk commentary, and press coverage. Furthermore despite the bearish views held by some, Deutsche Bank was long the housing market and endured significant losses.'
The senate report, known as the Levin-Coburn report, offered 19 recommendations for reform going beyond changes already enacted after the crisis in 2010's Dodd-Frank Wall Street and banking regulation overhaul.
(Reporting by Edward Taylor and Josie Cox; Editing by Jon Loades-Carter) Keywords: DEUTSCHEBANK/SHARES (edward.taylor@thomsonreuters.com; +49 69 7565 1187; Reuters Messaging: edward.taylor.thomsonreuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Deutsche Bank shares were down 3 percent at 41.40 euros by 1141 GMT, making them the weakest performer on the German blue-chip index, which was down 0.7 percent.
Markus Huber, the head of German Sales Trading at ETX Capital, said the stock was falling because of the 'U.S. investigation of Deutsche's role, in addition to a downgrade by Societe Generale'.
The U.S. senate report on the financial crisis, published on Wednesday by the U.S. Senate Subcommittee on Investigations, criticised Goldman Sachs, Deutsche Bank, the former Washington Mutual Bank, the U.S. Office of Thrift Supervision and credit rating agencies Moody's and Standard & Poor's.
'We will be referring this matter to the Justice Department and to the SEC (Securities and Exchange Commission),' Senator Carl Levin said. A spokesman later said that the subcommittee had no plans to release details of any referral.
Analysts were unsure of the impact given the vague nature of the remarks by U.S. Senators about what the implications could be, but the move back into the crosshairs of regulators is certainly no benefit.
'It's not good for their image to be in the headlines in this context,' said Wolfgang Gerke, a Professor of Finance, at the Bavarian Financial Center. 'But it's also not surprising given the mood among regulators and Deutsche Bank's position in the market alongside Goldman.'
More than 120 new documents provide insights into how Deutsche Bank contributed to the 'mortgage mess' the report said, referring to the contamination of the U.S. financial system with toxic mortgages.
The documents detail how Deutsche Bank helped assemble a $1.1 billion collateralised debt obligation (CDO) known as Gemstone 7, stood by as it was filled with low-quality assets that its top CFO trader referred to as 'crap' and 'pigs', and rushed to sell it 'before the market falls off a cliff'.
Deutsche Bank lost $4.5 billion when the mortgage market collapsed, but would have lost even more if it had not cut its losses by selling CDOs like Gemstone, the report said.
Deutsche Bank said, 'As the report correctly states, there were divergent views within the bank about the U.S. housing market. However, the banks views were fully communicated to the market through research reports, industry events, trading desk commentary, and press coverage. Furthermore despite the bearish views held by some, Deutsche Bank was long the housing market and endured significant losses.'
The senate report, known as the Levin-Coburn report, offered 19 recommendations for reform going beyond changes already enacted after the crisis in 2010's Dodd-Frank Wall Street and banking regulation overhaul.
(Reporting by Edward Taylor and Josie Cox; Editing by Jon Loades-Carter) Keywords: DEUTSCHEBANK/SHARES (edward.taylor@thomsonreuters.com; +49 69 7565 1187; Reuters Messaging: edward.taylor.thomsonreuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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