Deutsche Bank must face U.S. lawsuit over subprime disclosures

Mon Jul 25, 2016 3:46pm EDT
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By Jonathan Stempel

NEW YORK (Reuters) - A U.S. judge on Monday said Deutsche Bank AG (DBKGn.DE: Quote) must face part of a lawsuit claiming it deceived investors who bought more than $5.4 billion of preferred securities by concealing its exposure to the fast-deteriorating subprime mortgage market.

U.S. District Judge Deborah Batts in Manhattan rejected the German bank's bid to dismiss claims with respect to roughly $2.55 billion of securities sold in November 2007 and February 2008, court papers show.

She also dismissed claims with respect to $2.9 billion of securities sold in May 2007, July 2007 and May 2008.

Deutsche Bank spokeswoman Amanda Williams declined to comment. Eric Niehaus, a lawyer for the plaintiffs, did not immediately respond to requests for comment.

The lawsuit, led by industrial metals company Belmont Holdings Corp and two individuals, is one of many seeking to hold banks responsible for concealing risks prior to the U.S. housing and financial crises.

Investors said Deutsche Bank should have warned them in offering materials how it had taken on significant exposure to subprime markets through residential mortgage-backed securities and collateralized debt obligations.

They said this could have stopped them from buying the bank's preferred securities before their value tumbled by nearly two-thirds, causing billions of dollars of losses.

Batts had dismissed the lawsuit in 2012, and the federal appeals court in Manhattan upheld that dismissal in 2014.   Continued...

A logo of a branch of Germany's Deutsche Bank is seen in Cologne, Germany, July 18, 2016.  REUTERS/Wolfgang Rattay