Deutsche Bank, the largest lender in Germany has been ordered to pay a $14bn fine for its role in selling mortgage-backed bonds prior to the 2008 global financial crisis.
Germany to Rescue Deutsche Bank In The Face Of Massive US Fines
Following the order, the German government has plans underway to rescue the bank in the event that it is unable to pay the fines in the US.
According to German newspaper, Die Zeit, it is possible that the government will take a 25% stake in Deutsche bank in the worst-case scenario.
However, the bank has been quick to deny the report.
The finance ministry in Germany has said that the report is untrue and that there are no rescue plans underway.
In a statement, the ministry said, “There is no reason to spread such speculation and the bank has made that clear.”
In its report, Die Zeit pointed out that despite prior denials, the government was in fact preparing to rescue the bank and that the plans would be enforced if Deutsche required more capital to fulfill its obligations in the US in case the bank was unable to raise capital from the markets.
The US Department of Justice fined Deutsche up to triple the amount the bank had saved to pay the fine.
The massive fine has been criticized and it is not expected that the bank will need to pay $14bn, as this amount may be negotiable. According to John Cryan, CEO of Deutsche, the bank has made it clear all along that it was not prepared to pay the massive fine.
Die Zeit’s report said that as part of the rescue plan, the bank would be able to sell shares of its business to other financial firms at a price that would allow the bank to avoid making major losses but still be able to meet its obligations to the US Justice Department.
The newspaper further explained that this scenario could happen if Deutsche sold its businesses lower than their value and in case of an emergency, the government would have to come in and guarantee these transactions.