Europe's banks reel at $14bn Deutsche fine

European banks were stunned today as it emerged the US Justice Department was planning to charge Deutsche Bank a huge $14 billion (£10.6 billion) to settle claims it mis-sold toxic debts at the heart of the global financial crisis.

The figure is more than three times the amount analysts had forecast and would put huge pressure on the balance sheet of Germany’s biggest lender. Shares in the bank dropped 7% today giving it a market value of just under €18 billion (£15 billion).

Shares in Royal Bank of Scotland were hit hard by the news. It, too, is in the final stages of negotiating a settlement with the Justice Department over its role in mis-selling residential mortgage-backed securities in the run up to the global financial crisis.

Some analysts have speculated it might have to pay up to $13 billion. Its shares dropped 7.5p, or 4%, to 186.7p.

Barclays and Standard Chartered shares both dropped 2%. On the continent, bank stocks also tumbled, with Italy’s troubled Monte dei Paschi shares being suspended after crashing more than 7%.

“Deutsche Bank has no intention to settle these potential civil claims anywhere near the number cited,” Deutsche said.

“The bank confirms market speculation of an opening position by the Department of Justice of $14 billion and that it has invited the bank as the next step to submit a counter-proposal.”

The department declined to comment.

It is highly unusual for a bank to go so public when it is negotiating with US regulators. Deutsche said the case centred on its issuing and underwriting of residential mortgage-backed securities and related securitisations between 2005 and 2007.

The bank, headed by British banker John Cryan, said: “The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts.”

In the past, the Justice Department has made a high opening bid with banks and then accepted a much lower figure.