French Lawmakers Say Deutsche Bank U.S. Fine Could Cause Crisis

  • U.S. is seeking $14 billion in mortgage securities probe
  • Legal bill has heightened concerns about German bank’s future

Europe could face financial turmoil if the U.S. forces Deutsche Bank AG to pay $14 billion to settle civil claims over the company’s handling of mortgage-backed securities, French lawmakers said.

“The amount is such that it could provoke a potentially systemic crisis,” Socialist politician Karine Berger told journalists in Paris Wednesday. Any banking collapse tied to Deutsche Bank’s U.S. legal woes would have “incalculable economic consequences” in Europe, said Pierre Lellouche of the opposition Les Republicains party.

The lawmakers spoke as they prepared to present parliament with proposals to create a corporate settlement system similar to that in the U.S. Lawmakers say the measure will speed up resolution of disputes and serve as a counterweight to America’s growing legal reach. The U.S. has levied large fines against French companies including BNP Paribas SA and Alstom SA under out-of-court agreements in recent years.

Germany’s largest bank has described the proposed $14 billion penalty as an “opening position” in negotiations with the Justice Department to end its probe of the bank’s role in the 2008 crisis. Analysts have said they expect U.S. authorities to settle on a fine of about $5 billion.

Deutsche Bank’s shares fell to all-time low last week as the large figure fed concern the lender’s mounting legal bills will force Chief Executive Officer John Cryan to tap investors for fresh capital, or even seek a state rescue. He has said the bank has no plans to pursue either of those options or to pay anywhere close to $14 billion.

The bank needs to take steps to convince investors it has a viable business model and address “issues of operational risk arising from litigation,” Peter Dattels, the International Monetary Fund’s deputy director of monetary and capital markets, said Wednesday.

The IMF said in June that Deutsche Bank’s connections to other lenders may make it the single biggest contributor to systemic risk among global banks. The company has assets of about 1.8 trillion euros ($2.02 trillion), more than half the size of the German economy, and operates Europe’s largest investment bank.

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