Berlin pursues discreet talks with U.S. officials on Deutsche Bank

Wed Oct 5, 2016 2:53pm EDT
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By Paul Carrel and Noah Barkin

BERLIN (Reuters) - The German government is pursuing discreet talks with U.S. authorities to help Deutsche Bank (DBKGn.DE: Quote) secure a swift settlement over the sale of toxic mortgage bonds, according to sources in Berlin.

Until now, German officials have played down their role in the standoff, saying it is up to Deutsche to work out a deal with the U.S. Department of Justice (DOJ), which is demanding up to $14 billion to settle claims the lender mis-sold mortgage-backed securities before the financial crisis.

But government officials in Berlin, speaking on condition of anonymity, told Reuters they hoped to facilitate a quick deal that would buy Deutsche Bank time to regain its footing.

One senior government official told Reuters there was "contact at all levels" between German and American officials.

Another source said Finance Minister Wolfgang Schaeuble was not planning to meet DOJ officials during a trip to Washington this week for International Monetary Fund meetings, but added: "You can hold talks. It doesn't have to be the minister."

Deutsche has been engulfed in crisis since news of the $14 billion U.S. demand emerged last month. It is fighting the fine but could have to turn to investors for more money if it is imposed in full.

The resolution of the crisis through a reduced settlement is crucial for Chancellor Angela Merkel, who faces a federal election next year. It could be political poison for her government to rescue a bank that got into trouble through speculating. At the same time, officials recognize that Germany's biggest bank, which employs around 100,000 people, cannot be allowed to fail.

"Everyone knows the significance of the bank," said a third government official.   Continued...

Window cleaners are working on the facade of the headquarters of Germany's Deutsche Bank in Frankfurt, Germany, October 5, 2016. REUTERS/Kai Pfaffenbach