New York: Deutsche Bank AG employees may owe their cash bonuses for 2016, however modest, to a last-minute bargain by Chief Executive Officer John Cryan (pictured).
The beleaguered German bank, long embroiled in negotiations with the US Justice Department, was inching closer in recent weeks to a resolution over its sale of defective residential mortgage-backed securities that fuelled the financial crisis.
Barclays was deep in parallel talks with the government before hitting an impasse by mid-week.
Deutsche Bank had no desire for a drawn-out court fight. Around the same time prosecutors filed a lawsuit against Barclays on Thursday, Deutsche Bank’s lawyers said a holiday deal seemed possible.
Cryan pounced, according to someone close to the talks. The bank agreed to pay just $3.1bn in cash to resolve the case and $4.1bn in remediation to homeowners. It’s a victory for a firm that had faced an opening gambit from prosecutors of $14bn, and for the CEO, who’s been hamstrung by myriad regulatory problems in the US and abroad. The cash penalty is well within the range the bank had anticipated, easing concerns about capital pressure.
Resolution of the case before December 31 may enable Deutsche Bank to set aside money for bonuses, a relief for a firm that has struggled to keep its best employees.
In recent months, executives had contemplated replacing cash bonuses with stock. Representatives of Deutsche Bank and the Justice Department declined to comment.
Cryan, 56, still has other legal hurdles, including compliance lapses detailed in an internal report over so-called mirror trades that individuals used to move money out of Russia. In that matter, the bank also said Thursday there was no indication that it had violated sanctions, suggesting the possible punishment would also be manageable.
When word leaked in September that prosecutors had initially sought $14bn from Deutsche Bank over mortgage securities, the stock plunged on investor fears its capital would be depleted.
Against that backdrop, lawyers from Barclays and Credit Suisse Group AG conducted their own brittle exchanges over allegations of mortgage fraud with a team of civil prosecutors in Brooklyn and Colorado and the Justice Department in Washington, according to people with knowledge of the matter. Representatives of both lenders declined to comment on their cases.
The prosecutors asked for less in initial discussions with Barclays than they had of Deutsche Bank, said people close to the talks. Still, the first figure - which the bank didn’t disclose - stunned executives who believed it was far beyond what was merited, the people said.
