Shares of Deutsche Bank plunge amid US legal dispute

Allegedly, Justice has proposed that the company pay $14 billion in order to settle a series of investigations into how it misled investors about the quality and safety of mortgage-backed securities it sold prior to last decade’s financial crisis.

Deutsche Bank later confirmed that the $14 billion figure was an opening bid and that the bank had been invited to submit a counterproposal. Other banks which settled recently include Bank of America, Citigroup and JP Morgan.

Deutsche Bank, whose shares dropped roughly 8.5%, said it would fight the demand.

The DoJ had invited it to submit a counter-offer, it said.

In June, the International Monetary Fund (IMF) said that of the banks big enough to bring the financial system crashing down, Deutsche Bank was the riskiest.

Deutsche has been having problems recently. This figure can also be regarded as the opening bid which can go much lower depending upon the type of negotiations between the United States government and the German lender. The bank’s total market value is only €16.7 billion.

The DoJ has taken a tough stance in settlement negotiations with other banks, requesting sums higher than the eventual fine. “It remains to be seen exactly how much Deutsche Bank pays, but it’s a reminder of all the regulatory issues that the banks still face”, IG market analyst Chris Beauchamp said. Among those were Commerzbank, which was down 3 percent and Royal Bank of Scotland, which fell by 5.3 percent. “But because of the election campaign it may end up higher – at maybe 6 or 7 billion”. The fine eventually came in at $7bn.

In 2014, U.S. bank Citigroup settled a probe into mortgage-backed securities for $7bn (£5bn) while in a similar case this year, Goldman Sachs agreed to pay $5bn (£4bn).

US Treasury yields, meanwhile, rose after data showed US consumer prices increased more than expected in August, pointing to a steady build-up of inflation.

Shares of Deutsche Bank AG (USA) (NYSE: DB) plunged almost 10 percent at $13.41 ahead of Friday’s morning session after the German-based bank was slapped with a $14 billion penalty from the U.S. Justice Department.

A number of banks have settled with U.S. authorities over mis-selling of mortgage-backed securities.

The bank employs approximately 100,000 people.

Deutsche Bank: Wall Street closed lower Friday in part because of a major Deutsche Bank sell-off.

Earlier this year, peer Goldman Sachs Group Inc. That will force the bank to go for more litigation reserves which it already has more than numerous banks on the Street.