The U.S. Department of Justice is asking Deutsche Bank to pay $14 billion to settle an investigation into its selling of mortgage-backed securities. As Sara Hemrajani reports, the claim far outstrips the bank's and investors' expectations.
A Friday sell-off for investors this week. European stocks tumbling, especially financials, as markets digest news of another hefty fine. The U.S. Department of Justice now wants Deutsche Bank to pay $14 billion for misselling mortgage-backed securities. The size of that amount taking many by surprise. SOUNDBITE: Justin Urquhart Stewart, managing director, Seven Investment Management, saying (English): "This headline figure is obviously extremely disturbing, particularly when you look at that value compared to the actual capital itself of Deutsche Bank, you're wiping out most of the value of the business. No, the reality is of course they won't have to pay that. We only have to look at the precedent for Goldman Sachs and they ended up reaching a deal, so we'll probably see a number which is probably close to $4-5 billion. Still a huge amount." Negotiations on a settlement could take several months and Berlin has asked for a "fair result". Deutsche Bank itself saying it has no intention of forking out that much cash. But the ongoing legal troubles surrounding the German lender means it litigation bill has already hit billions of euros. SOUNDBITE: Robert Halver, Head of Capital Analysis, Baader Bank, saying (German): "It's all very murky what they're doing there. For Deutsche Bank, it's important to get out of this misery at some point and to be able to say they are over these cases, no matter how expensive they are." Deutsche Bank shares fell as much as 8 percent. And with the 2008 financial crisis still casting a shadow, there are worries others could also be clobbered.