Deutsche Bank agrees $7.2bn settlement with US Department of Justice over mortgage-backed securities

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Deutsche Bank will fork out £6bn over mis-selling and pooling mortgage-backed securities between 2005 and 2007 (Source: Getty)

Deutsche Bank has agreed to pay the US Department of Justice $7.2bn (£6bn) over misleading investors with sales of mortgage-backed securities in the run-up to the financial crisis. 

The bank agreed the settlement amount in principle in December, but it was only finalised today. 

Deutsche Bank will pay a civil penalty of $3.1bn and provide $4.1bn in consumer relief, such as loan forgiveness, as part of its payment.

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“This $7.2bn resolution – the largest of its kind – recognises the immense breadth of Deutsche Bank’s unlawful scheme by demanding a painful penalty from the bank, along with billions of dollars of relief to the communities and homeowners that continue to struggle because of Wall Street’s greed,” said principal deputy associate attorney general Bill Baer.

“The department will remain relentless in holding financial institutions accountable for the harm their misconduct inflicted on investors, our economy and American consumers.”

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Settling the mortgage-securities case would mean Deutsche Bank has shaken off one legal headache – however, other major probes remain.

Deutsche faces investigations into suspicious equities trades in Russia, as well as alleged violations of US sanctions on Iran and other countries.

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Meanwhile, the lender will slash bonuses for senior employees, including investment bankers in London and New York, by about 90 per cent.

The move is expected to be announced tomorrow, German newspaper Spiegel reported. The bonus cuts for 2016 will affect staff who are not bound by a collective wage bargaining agreement.