Credit Suisse and Deutsche Bank have been hit with a combined penalty of more than $12 billion over the sale of U.S. toxic debt, further hampering two of Europe's leading investment banks as they grapple with falling profits. Ciara Lee reports.
A combined penalty of more than 12 billion dollars for two of Europe's leading investment banks. First up, Deutsche Bank. It's agreed to a $7.2 billion settlement with the U.S. department of justice over its sale and pooling of toxic mortgage securities. The draft agreement offers some relief to the German bank. Its shares plunged to a record low in September, over fears the fine could be double that. (SOUNDBITE) (English) LONDON CAPITAL GROUP, SENIOR MARKETS ANALYST, JASPER LAWLER, SAYING: "What is actually a quite good result for Deutsche Bank is that the way the funds will be distributed, some of it will be going to fine, some of it is going towards customer relief. That should mean that rather than having to put all of that 7 billion towards paying off the fines immediately, the other remaining 4 billion in customer relief, that's going to be a bit more of a trickle over time." Credit Suisse also getting hit with a fine. It's to pay U.S. authorities 2.48 billion dollars to settle claims it misled investors in residential mortgage-backed securities. The Swiss bank will also pay $2.8 billion over five years to offset the impact on consumers. (SOUNDBITE) (English) LONDON CAPITAL GROUP, SENIOR MARKETS ANALYST, JASPER LAWLER, SAYING: "This just means that any profits that these banks would have made perhaps as we head into a higher interest rate environment, are going to be put aside for provisions for fines instead of being handed back towards share holders and reinvestment in the business. The deals are the latest in Barack Obama's 2012 initiative to hold Wall Street accountable for misconduct. The U.S. Department of Justice this week sued Barclays and two former executives on civil charges of fraud in the sale of mortgage-backed securities.