US state and federal authorities have begun settlement negotiations with Germany’s Commerzbank AG and Deutsche Bank AG over their dealings with countries blacklisted by the US, a source with direct knowledge of the regulatory investigations said.
The settlement talks have just begun and the timing of the deal is unclear at this time, the person told reporters.
Deutsche Bank and Commerzbank declined to comment.
Commerzbank, accused by US authorities of transferring money through its US operations on behalf of companies in Iran and Sudan, could pay at least US$500 million in penalties, the New York Times reported.
The No. 2 German lender would likely face a so-called deferred prosecution agreement that would suspend criminal charges in exchange for the financial penalty and other concessions, the report said.
A potential deal with Commerzbank, which is expected to pave the way for a separate settlement with Deutsche Bank, would pale in comparison to the deal with France’s BNP Paribas SA , the paper said.
Last week, the French bank pleaded guilty to two criminal charges and agreed to pay almost US$9 billion to resolve accusations that it violated US sanctions against Sudan, Cuba and Iran, a severe punishment aimed at sending a clear message to other financial institutions around the world.
Commerzbank set aside 934 million euros (US$1.27 billion) at the end of last year as provision for litigation threats, including a possible US probe into whether the bank breached sanctions.
Reuters reported last week that Deutsche Bank, Banamex USA — the US arm of Citigroup Inc’s Mexican banking group Banamex SA — and two major French banks — Credit Agricole and Societe Generale SA — are among those being investigated for possible money-laundering or sanctions violations.
However, talks with the two French banks were not on the front burner, the source told reporters on Monday.
The authorities conducting the investigations — the US Department of Justice, New York State’s banking regulator and the Manhattan district attorney’s office — could not be reached immediately for comment.
Numerous other financial institutions, including Standard Chartered PLC, Lloyds Banking Group PLC and Credit Suisse Group AG have previously settled with US authorities over allegations that they violated sanctions.