Deutsche Bank (FRA:DBK) shares fell over 8 percent in early trading, after the bank was asked to pay $14 billion to settle an investigation into its practices in the US.
The bank has been under investigation by the the US Department of Justice into the the bank’s issuance and underwriting of residential mortgage-backed securities between 2005 and 2007.
In a statement released this morning Deutsche Bank said it “has no intent to settle these potential civil claims anywhere near the number cited”, adding that “the negotiations are only just beginning.”
Residential mortgage-backed securities were a key factor in causing the 2008 financial crisis and several US banks have been under investigation since.
Deutsche Bank was down 8.29 percent at 13.54 (1130GMT).
Bank shares drag down FTSE
Deutsche Bank’s fine dragged down the FTSE this morning, as investors reacted to the news.
Today’s losses put the banks on course for their worst week since the EU Referendum result was announced, down 6 percent over the last 5 days. Shares in the Royal Bank of Scotland fell nearly 4 percent on fears that it may be hit by a similar figure after its ongoing investigation in the US.
ETX Capital analyst Neil Wilson questioned the validity of such a “needlessly punitive” figure:
“With Deutsche Bank facing a $14bn claim against it in the U.S. for alleged irregularities in the way it sold mortgage securities before the financial crisis, you have to wonder if financial regulators are starting to do more harm than good.
“How can banks hope to move on from the crisis?”
Commenting on the RBS fears, Wilson said:
“Even a third of this figure which deliver a crippling blow to the lender, making its return to profitability even further off. It would also derail plans to return the bank to private ownership any time soon.”
Markets were down across Europe, with the FTSE down 0.29 percent and the Dax down 1 percent.
Asian markets had a more positive day despite a gloomy start to the week. Japan’s Nikkei rose 0.7% to 16,519.2 points, withAustralia’s S&P/ASX 200 gained 1% to 5,296.7 points.