Credit Suisse agrees to pay $5.3 bn to settle USA mortgage case

Federal prosecutors argued that Barclays sold $31 billion in securities which packaged poor-quality subprime and Alt-A mortgages to investors around the world, more than half of which defaulted after Barclays deliberately and systematically lied to investors about the loans.

Billions of dollars of relief may be on the way for borrowers who got mortgages before the housing bust.

The penalty puts them at a further disadvantage to larger U.S. rivals. It had already set aside billions of euros in anticipation of the fine and in the early hours of Friday said it expected to take another hit of $1.2bn in its fourth quarter. The banking giant announced the settlement yesterday evening, saying that it has reached an agreement with DoJ. They often also come with a trove of trader communications emails and Bloomberg instant messages indicating deception.

The U.S. Justice Department wasn’t immediately available for comment. It isn’t clear how much more wrapping up these cases will cost.

Deutsche Bank, Germany’s biggest, agreed to pay $7.2 billion – $3.1 billion in fines and $4.1 billion in consumer relief. The American authorities were originally seeking a penalty of double that size. “Investors have anxious about whether those institutions’ capital is sufficient to cover any possible US fines”. Bank of America Corp., which had the largest such settlement, agreed to pay $16.7 billion over bonds that were worth four times those of Deutsche Bank. The bank has been struggling to put expensive litigation from past misconduct behind it.

The Deutsche Bank settlement is likely to bring some relief for the German bank’s shareholders, who earlier in the year anxious about a much bigger penalty. The bank will pay a civil monetary penalty of $3.1 billion and $4.1 billion in consumer relief in the United States.

Gains in lenders supported European stocks after Deutsche Bank AG and Credit Suisse Group AG agreed to settle USA mortgage probes and Italy readied rescue funds for its firms.

The decision comes after the bank said earlier Friday that it would tap a government rescue fund to shore up its finances, after it failed to raise fresh capital from private investors. The DoJ has initiated legal action against Barclays PLC alleging more than $30 billion in fraud-tainted sales.

The deals are the latest the Justice Department has reached with major financial institutions since US P resident Barack Obama’s 2012 initiative to hold Wall Street accountable for misconduct in the mortgage securities market that helped lead to the worst financial crisis since the Great Depression. Ethicists say this concerns them.