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Banking shares across Europe hit by Deutsche Bank settlement proposals

Published 16/09/2016

A city worker looking at a stock ticker screen at the London Stock Exchange
A city worker looking at a stock ticker screen at the London Stock Exchange

European banking shares have plummeted after the US Department of Justice (DoJ) slapped Deutsche Bank with a hefty settlement proposal.

The DoJ has tabled a 14 billion US dollar (£10.5 billion) settlement deal following a probe into the German lender's sale of mortgage-backed securities during the financial crisis.

Investors took flight from banking stocks amid concerns over the regulatory risk for the sector.

Royal Bank of Scotland (RBS) was the biggest faller on London's top-flight index, dropping more than 4%, while Standard Chartered and Barclays fell 3% and 2% respectively.

Elsewhere in Europe, Swiss banking giant Credit Suisse was off more than 5% and French bank BNP Paribas slid 2%.

Neil Wilson, market analyst at ETX Capital, said the DoJ's settlement proposal posed "serious implications" for RBS, which may face its own settlement proposal.

He said: "RBS could have to pay up to 13 billion US dollars (£9.8 billion) to settle the claims. Even a third of this figure would deliver a crippling blow to the lender, making its return to profitability even further off. It would also derail plans to return the bank to private ownership any time soon.

"After its latest loss, RBS has notched up £50 billion in losses since the financial crisis - more than the £45 billion stumped up by taxpayers to save the bank.

"Bank bashing is still popular and these banking regulators are looking like (the) gamekeepers have turned poachers."

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