LONDON (dpa-AFX) - Deutsche Bank AG (DB) said that it has reached a settlement in principle with the Department of Justice in the United States regarding civil claims that the DoJ considered in connection with the bank's issuance and underwriting of residential mortgage-backed securities or RMBS and related securitization activities between 2005 and 2007.
As per the terms of the settlement agreement, Deutsche Bank agreed to pay a civil monetary penalty of $3.1 billion and to provide $4.1 billion in consumer relief in the United States.
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 U.S. Department of Justice and the bank will agree on the final documentation.
In connection with the resolution of this matter, Deutsche Bank expects to record pre-tax charges of about $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. The bank will publish its preliminary results for the 2016 financial year as scheduled on February 2, 2017.
Previously, The United States Department of Justice said that it filed a civil complaint in the Eastern District of New York against Barclays Bank PLC and several of its United States affiliates, alleging that Barclays engaged in a fraudulent scheme to sell residential mortgage-backed securities or RMBS supported by defective and misrepresented mortgage loans.
According to the lawsuit, from 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme.
The suit also names as defendants two former Barclays executives: Paul Menefee, of Austin, Texas, who served as Barclays' head banker on its subprime RMBS securitizations, and John Carroll, of Port Washington, New York, who served as Barclays' head trader for subprime loan acquisitions.
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