FRANKFURT (dpa-AFX) - The U.S. Justice Department, along with federal partners, announced a $7.2 billion settlement with Deutsche Bank (DB) resolving federal civil claims that Deutsche Bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007.
'This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public. Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis,' said Attorney General Loretta E. Lynch.
John Cryan, Deutsche Bank CEO said, 'Although it is good that we can bring this matter to a close, the price we are paying is high. The DoJ is highly critical of these transactions. The conduct they cite, which occurred from 2005 to 2007, falls short of our standards and is unacceptable. We apologize unreservedly for it. We have subsequently exited many of the underlying activities and comprehensively improved our standards.'
John Cryan said that the settlement with the DoJ is also a financial burden for the company. As announced in December, Deutsche Bank agreed to pay a civil monetary penalty of 3.1 billion dollars and to provide 4.1 billion dollars in consumer relief in the United States, to be delivered over a period of five years. For the fourth quarter of 2016 the company expects the civil monetary penalty to have a negative impact on our pretax result of nearly $1.2 billion.
The Justice department said that the $7.2 billion agreement represents the single largest RMBS resolution for the conduct of a single entity. The settlement requires Deutsche Bank to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
Under the settlement, Deutsche Bank will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.
As part of the settlement, Deutsche Bank agreed to a detailed Statement of Facts. That statement describes how Deutsche Bank knowingly made false and misleading representations to investors about the characteristics of the mortgage loans it securitized in RMBS worth billions of dollars issued by the bank between 2006 and 2007.
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