Deutsche Bank agrees $7.2bn penalty with US regulators

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Germany's Deutsche Bank says it has agreed a $7.2bn (£5.9bn) payment to US authorities over an investigation into mortgage-backed securities.

The sum, which needs final approval, is far lower than the $14bn the US had asked the bank to pay in September.

That looming fine had caused concerns that a failure of the bank could pose a risk to the global financial system.

Credit Suisse also announced a similar deal, while Barclays is now under investigation too.

The sale of residential mortgage-backed securities played a significant role in the 2008 financial crisis.

Source: Digital Look - 23rd Dec 2016

Several banks in the US have been subject to investigations over allegations of giving mortgages to unqualified borrowers, then repackaging those loans as safe investments and selling the risk on to others. The inquiries related to deals done between 2005 and 2007.

Meanwhile, Credit Suisse has said it has agreed a $5.28bn deal to settle its own dispute with US authorities over mortgage-backed securities.

The Swiss bank will pay US authorities $2.48bn, and will also give consumers $2.8bn in compensation over the next five years.

At the same time, the US Department of Justice has said it is now also suing Barclays for alleged mortgage securities fraud.

It alleged that from 2005 to 2007, Barclays "repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses".