Deutsche Bank AG yesterday said it does not intend to pay US$14 billion to settle civil claims with the US Department of Justice for its handling of residential mortgage-backed securities and related transactions.
The bank confirmed in a statement that the department had proposed a settlement of US$14 billion and asked the German bank to make a counterproposal.
“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks, which have settled at materially lower amounts,” the Frankfurt, Germany-based lender said.
Deutsche Bank is among many financial institutions investigated over dealings in shoddy mortgages in the run-up to the 2008 financial crisis. The government has accused the banks of misleading investors about the quality of their loans.
Earlier this year, the department announced a roughly US$5 billion settlement with Goldman Sachs Group Inc over the sale of mortgage-backed securities. Other banks that settled in the past two years include Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co.
The banks collectively came under scrutiny for the sale of securities that, while promoted as relatively safe, contained residential mortgages from borrowers who were unlikely to be able to repay their loans. The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the recession that began in late 2007 as the US housing market collapsed and investors suffered billions in losses.
Separately, Phoenix Group Holdings PLC, Britain’s largest owner of life insurance funds closed to new customers, said it was in advanced discussions with Deutsche Bank about the possible acquisition of the German lender’s British insurance business, Abbey Life Assurance Co.
Deutsche Bank was nearing a deal to sell the business to Phoenix, a person close to the matter said on Thursday.
Phoenix is planning to raise ￡800 million (US$1.06 billion) to fund the purchase, which is to be finalized in the next couple of weeks, the person said.
Deutsche Bank began weighing the sale of Abbey Life in October last year, attracting interest from Swiss Re AG unit Admin Re, Phoenix and Legal & General Group PLC among others, sources familiar with the matter said.
Abbey Life, which was bought by Deutsche Bank for ￡977 million in 2007, is valued at about ￡1 billion, sources said.
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