Deutsche Bank and Credit Suisse agree $12 billion settlement with DOJ

Settlements follow Depart of Justice’s decision to sue Barclays for selling fraudulent loans between 2005 and 2007.

Deutsche Bank and Credit Suisse have agreed to pay over $12 billion in combined settlements with the Department of Justice in the US for selling of toxic mortgage loans between 2005 and 2007. 

The settlement comes as the Department of Justice also announced it was suing Barclays over alleged fraud in the sale of mortgage securities after it failed to reach a settlement. 

In a statement, the Department of Justice said it will “not tolerate the defrauding of investors and the American people”.

Deutsche Bank has agreed to pay a monetary penalty of $3.1 billion and provide $4.1 billion in consumer relief in the form of loan modifications and assistance to homeowners. 

This was almost half the original fine had been touted to be, as the Department of Justice halved the $14 billion penalty it proposed in September.

Credit Suisse is to pay a $2.48 billion penalty and also provide $2.8 billion in consumer relief over the course of the next five years.

News of the settlements followed the Depart of Justice’s decision to sue Barclays bank to recover civil penalties for also selling fraudulent mortgage loans between 2005 and 2007.

The Depart of Justice said: “Financial institutions like Barclays occupy a position of vital public trust… Barclays jeopardised billions of dollars of wealth through practices that were plainly irresponsible and dishonest.   

“With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people.”

Deutsche Bank and Credit Suisse are the latest to reach settlements with the Depart of Justice for the selling of mortgage-backed securities.

In 2013, JP Morgan agreed to pay a $13 billion global settlement and a year later, Bank of America agreed to pay a record $16.65 billion to settle allegations of selling fraudulent mortgage loans. 

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