The U.S. Department of Justice (DOJ) is seeking up to $14 billion in penalties from Deutsche Bank in connection with allegations that the bank sold faulty mortgage-backed securities to investors in the run up to the financial crisis.
If the settlement went through “as is,” it would be the largest fine paid by any institution in connection with the sale of faulty MBS to date.
However, Deutsche Bank has vowed to fight the suit and says in a statement that it expects the final settlement amount to be significantly less than $14 billion.
It was initially expected that the DOJ would seek penalties of only up to $3.4 billion, the Wall Street Journal reports.
The fine is roughly equal to Deutsche Bank’s entire market capital value. The bank has reportedly been struggling in recent months to meet new capital reserve and liquidity requirements established under BASEL III.
The bank barely made it through European stress tests in July and has warned it may need to cut operating costs further following a sharp drop in revenue in the second quarter, the WSJ reports.
Bank officials say the negotiations with the DOJ are ongoing.
“The bank confirms market speculation of an opening position by the DOJ of $14 billion and that the DOJ has invited the bank as the next step to submit a counter proposal,” the bank says in its statement. “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 [that] have settled at materially lower amounts.”