Deutsche Bank to pay $7.2bn to settle US mortgages case

Deutsche Bank and the US Department of Justice have agreed the German lender will pay a $7.2bn settlement, one of the largest ever banking fines, for misleading investors in its sale of residential mortgage-backed securities in the run up to the financial crisis.

In settling the civil case, Deutsche will fork out for a $3.1bn penalty and has agreed to disburse $4.1bn in relief to affected homeowners, distressed borrowers and communities.

Last September, the DoJ proposed a $14bn payment to settle the investigation, at which Deutsche balked.

"This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public," attorney general Loretta Lynch said in a statement.

She added that the German lender "did not merely mislead investors: it contributed directly to an international financial crisis".

Since 2008, Deutsche Bank had already paid out over $9bn in fines and settlements

The DOJ said it is "one of the largest FIRREA penalties ever paid."

To compare, in 2014, Bank of America agreed to pay $10 billion to regulators in a settlement tied to residential mortgage-backed securities. That included fines from Merrill Lynch and countrywide that BofA acquired during the financial crisis.

In 2013, JPMorgan agreed to pay $9 billion, according to regulators.

As a part of the settlement, Deutsche Bank will admit to making "false representations and omitting material information from disclosures to investors about the loans included in RMBS securities sold by the Bank."

The agreement follows months of negotiations with the DOJ. The bank's stock was hit hard in September after it acknowledged the Justice Department had been seeking nearly twice as much.

In December, Reuters reported that Deutsche Bank had reached an agreement but it had not yet been finalized.

The Justice Department sued Barclays in December on charges of fraud in the sale of mortgage-backed securities in the run-up to the 2008-09 financial crisis. Barclays said that the claims in the lawsuit are "disconnected from the facts" and that it has an obligation to defend against "unreasonable allegations and demands," according to a Reuters report.