Deutsche Bank has agreed a $7.2 billion fine over an investigation into mortgage-backed securities in the US.
The sum, which needs final approval, is far lower than the $14 billion the US authorities had asked the German bank to pay in September.
That fine had caused concerns that a failure of Deutsche Bank could pose a risk to the global financial system.
Credit Suisse also announced a similar deal, while Barclays is now under investigation too.
The sale of residential mortgage-backed securities played a significant role in the 2008 financial crisis.
Several banks in the US have been subject to investigations over allegations of giving mortgages to unqualified borrowers, then repackaging those loans as safe investments and selling the risk on to others. The inquiries related to deals done between 2005 and 2007.
Meanwhile, Credit Suisse has said it has agreed a $5.28 billion deal to settle its own dispute with US authorities over mortgage-backed securities.
Credit Suisse will pay US authorities $2.48 billion, and will also give consumers $2.8 billion in compensation over the next five years.
The leaked Panama Papers have revealed that international banking giants are helping clients to avoid tax by using complicated offshore arrangements.
HSBC, Credit Suisse and the Royal Bank of Scotland-owned Coutts Trustees have denied allegations.
The revelations in are based on more than 11 million documents leaked from the law firm Mossack Fonseca.
They name lenders said to have helped to set up structures making it hard for tax officials to pinpoint money flows.
They also name institutions alleged to have helped companies that were subject to international sanctions.
Rami Makhlouf is the cousin of Syria’s President Bashar al-Assad and has reported wealth of $5 billion.
In 2008 the US Treasury imposed sanctions on him because it deemed him to be a “regime insider” and someone who “manipulated the Syrian judicial system and used Syrian intelligence officials to intimidate his business rivals”.
Mossack Fonseca continued to front six businesses – including one company called Drex Technologies – for Rami Makhlouf after the restrictions were put in place.
The files also show the Swiss branch of HSBC provided financial services for the company.
In 2010, two years after the sanctions were imposed, HSBC wrote to Mossack Fonseca saying it believed Drex Technologies was a company of “good standing”.
An internal email from Mossack Fonseca’s compliance department also suggests HSBC staff dealing with Drex Technologies knew who Rami Makhlouf was.
The email, dated February 17, 2011, says: “We have contacted HSBC who stated that they are very aware of the fact that Mr. Makhlouf is the cousin of the President of Syria.
“The HSBC compliance department of the bank not only in Geneva but also in their headquarters in London know about Mr. Makhlouf and confirm that they are comfortable with him.”
In response HSBC said: “We work closely with the authorities to fight financial crime and implement sanctions.
“Our policy is clear that offshore accounts can only remain open either where clients have been thoroughly vetted (including due diligence, ‘Know Your Customer’, source of wealth, and tax transparency checks), where authorities ask us to maintain an account for the purposes of monitoring activity, or where an account has been frozen based on sanctions obligations.”
The Panama leaks has revealed that more than 500 banks, including their subsidiaries and branches, registered nearly 15,600 shell companies with Mossack Fonseca.
Credit Suisse chief executive Tidjane Thiam said: “We do not condone structures for tax avoidance. Whenever there is a structure with a third party beneficiary we insist to know the identity of that beneficiary.”
Tidjane Thiam added: “We as a company, as a bank only encourage the use of structures when there is a legitimate economic purpose.”
A spokesman for Coutts Trustees said the bank followed the highest standards when complying with regulation.
He added: “We require all clients to be tax compliant as a condition of receiving our products and services and take a risk-based approach to identify and prevent tax evasion that relies upon extensive anti-money laundering systems and controls, including the requirement to understand the source of clients’ wealth.
“The provision of trust and administration services is an entirely legitimate and key aspect of wealth management and succession planning.”
Credit Suisse and Barclays have been fined a total of $154 million over their “dark pool” trading operations in the US.
“Dark pool” operations allow investors to trade large blocks of shares but keep the prices private.
Barclays has admitted misleading investors and violating securities law in the way it operated the pool. The bank will pay a $70 million fine.
Credit Suisse will pay $60 million and another $24.3 million relating to other violations.
The fines will be split between the State of New York and the Securities and Exchange Commission (SEC).
The New York Attorney General and the SEC have both censured the two banks for their misconduct.
New York Attorney General Eric Schneiderman said: “These cases mark the first major victory in the fight against fraud in dark pool trading that began when we first sued Barclays.”
He added that “co-ordinated and aggressive government action” had led to “admissions of wrongdoing, and meaningful reforms to protect investors from predatory, high-frequency traders”.
“We will continue to take the fight to those who aim to rig the system and those who look the other way,” Eric Schneiderman said.
Andrew Ceresney, director of the SEC’s enforcement division said: “Dark pools have a significant role in today’s equity marketplace, and the firms that run these venues must ensure that they do not make mis-statements to subscribers about their material operations.”
Credit Suisse will neither admit nor deny the allegations.
A spokeswoman said the bank was “pleased to have resolved these matters” with the SEC and the New York attorney general.
A Barclays representative said: “The agreement will enable us to focus all of our efforts on serving our clients.”
In 2015, Barclays lost an attempt to have the case dismissed.
Part of the point of dark pool trading systems is to allow institutions to sell large numbers of shares privately, helping to make sure their actions don’t result in a cut in the price they can get.
Credit Suisse has pleaded guilty to helping some American clients avoid paying taxes to the US government and agreed to pay a $2.6 billion fine.
It is the biggest bank to plead guilty to criminal charges in the US in more than 20 years.
Attorney general Eric Holder said Credit Suisse helped American “tax cheats dodge US taxes”.
The Swiss banking giant said in a statement it deeply regretted the past misconduct.
Credit Suisse has pleaded guilty to helping some American clients avoid paying taxes to the US government and agreed to pay a $2.6 billion fine
Credit Suisse said the settlement would reduce its second-quarter net profit by 1.6 billion Swiss Francs ($1.8 billion).
However, as part of the agreement with US regulators, the bank will not lose its banking license in the US.
Credit Suisse’s chief executive, Brady Dougan, said: “Having this matter fully resolved is an important step forward for us. We have seen no material impact on our business resulting from the heightened public attention on this issue in the past several weeks.”
Eric Holder told a press conference: “The bank went to elaborate lengths to shield itself, its employees, and the tax cheats it served, from accountability for their criminal actions.”
“They subverted disclosure requirements, destroyed bank records, and concealed transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds.”
He added that the tax evasion schemes went back decades, saying that in one case, the practice of using sham entities began more than 100 years ago.
However, according to US media reports, neither Credit Suisse chairman Urs Rohner, nor chief executive Brady Dougan are expected to lose their jobs as a result of the agreement.
US authorities have already indicted eight Credit Suisse employees who helped clients evade taxes.
Credit Suisse is not alone. US prosecutors are chasing more than a dozen other Swiss banks for allegedly helping wealthy Americans dodge US taxes, and at the press conference, they hinted that there would be more settlements to come.
Credit Suisse has agreed to pay $885 million to settle claims it mis-sold mortgage-backed securities in the US before the financial crisis.
The Swiss bank was accused of misleading US government-backed mortgage giants, Fannie Mae and Freddie Mac, over the quality of the products.
Fannie Mae and Freddie Mac, which received government bailouts in 2008, will be paid $234 million and $651 million respectively.
More than $10.1 billion has been recovered from banks in similar actions.
Credit Suisse has agreed to pay $885 million to settle claims it mis-sold mortgage-backed securities in the US before the financial crisis (photo Reuters)
The Credit Suisse settlement is the ninth that the Federal Housing Finance Agency (FHFA) has reached over some $200 billion in mortgage-backed securities – an investment product at the centre of the global financial crisis.
Since 2011 the FHFA, which oversees Fannie Mae and Freddie Mac, has filed 18 lawsuits against banks over the products.
Credit Suisse said the settlement resolved its biggest remaining mortgage-related lawsuit.
The settlement covered $16.6 billion of securities sold to the two mortgage companies between 2005 and 2007.
Credit Suisse said it would reduce previously reported 2013 annual earnings by 275 million Swiss francs ($311 million) as a result of the settlement.
A US congressional committee report found that Credit Suisse “helped its US customers conceal their Swiss accounts” and avoid billions of dollars in American taxes.
The report claims the bank opened Swiss accounts for more than 22,000 US customers, with assets totaling $12 billion at their peak.
It alleges bankers helped clients create offshore shell entities and design transactions to avoid arousing suspicion.
“From at least 2001 to 2008, Credit Suisse employed banking practices that facilitated tax evasion by US customers,” the report said.
It said the practices included “opening undeclared Swiss accounts” or accounts to “mask their US ownership”, as well as sending Swiss bankers to the US to recruit new customers and “service existing Swiss accounts without creating paper trails”.
US prosecutors are chasing 14 Swiss banks for allegedly helping wealthy Americans dodge US taxes.
Credit Suisse’s private banking and wealth management division has already put aside 175 million Swiss francs to fight a US investigation into hidden offshore accounts in Switzerland.
A US congressional committee report found that Credit Suisse “helped its US customers conceal their Swiss accounts” and avoid billions of dollars in American taxes
The bank has said it was “working towards a resolution” with US authorities but has not given a time-frame of when that resolution might be reached.
The report has also published details of the way, it alleges, the bank worked to keep the accounts concealed from the US authorities.
It said some bankers even applied for US visa waivers, claiming they planned to visit the country for “tourism” instead of “business” purposes.
The report listed one incident where a client was handed bank statements hidden in a Sports Illustrated magazine.
It said the bank also used sponsored events, including the annual “Swiss Ball” in New York and golf tournaments in Florida, to recruit more customers.
The committee has called upon US regulators to take strict action against banks that help US customers avoid taxes.
“For too long, international financial institutions like Credit Suisse have profited from their offshore tax haven schemes while depriving the US economy of billions of dollars in tax revenues by facilitating US tax evasion,” said Senator John McCain, a member of the subcommittee.
“As federal regulators begin to crack down on these banks’ illicit practices, it is imperative that they use every legal tool at their disposal to hold these banks fully accountable for willfully deceiving the US government and seek penalties that will deter similar misconduct in the future.”
The US Justice Department issued a statement saying it was investigating various Swiss banks over the issue.
Credit ratings agency Moody’s has decided to downgrade 15 global banks and financial institutions.
In the US, Bank of America and Citigroup were among those marked down.
The UK banks downgraded were Royal Bank of Scotland, Barclays and HSBC. Lloyds also had its rating cut by Moody’s in a separate announcement.
The other institutions that have been downgraded are Goldman Sachs, Morgan Stanley, JP Morgan Chase, Credit Suisse, UBS, BNP Paribas, Credit Agricole, Societe Generale, Deutsche Bank and Royal Bank of Canada.
Moody’s added that it was putting some of the banks on a negative outlook, which is a warning that they could be downgraded again in the future.
Explaining this, it said governments around the world had shown a “clear intent” to reduce their support for banks going forward.
Credit ratings agency Moody's has decided to downgrade 15 global banks and financial institutions
In Friday trading, shares in Royal Bank of Scotland (RBS) were up 0.8%, HSBC had gained 0.6%, and Barclays had risen 0.5%. Lloyds was 1.6% higher.
In France and Germany, Societe Generale was up 2.1%, while shares in Deutsche Bank were flat.
In a statement, RBS responded to its downgrade saying: “The group disagrees with Moody’s ratings change, which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile.”
RBS estimated that the downgrade could mean it would need to find an extra £9bn in collateral for its debts.
Lloyds said it believed that the change would have “limited impact on our funding costs and market capacity”.
In the US, Citigroup said it “strongly disagrees” with Moody’s decision.
Of the banks downgraded, four were cut by one notch on Moody’s ranking scale, including HSBC, Royal Bank of Scotland, and also Lloyds.
A further 10 banks had their rating reduced by two notches, including Barclays. Credit Suisse was lowered by three notches.
Moody’s separates the 15 banks into three groupings, relative to its assessment of their resilience to any global financial market turmoil.
It puts HSBC in its strongest “first group”, together with Royal Bank of Canada and JP Morgan.
Moody’s says these banks have “stronger buffers” than many of their peers, and “generally more stable businesses”.
Barclays is in its “second group” of banks which Moody’s says faces “sometimes adverse factors”. Other banks at this level are BNP Paribas and Goldman Sachs.
RBS is in the bottom “third group”, which comprises banks which “have been affected by problems in risk management, or have a history of high volatility”. Other banks in this grouping include Bank of America and Citigroup.
Privacy & Cookies Policy
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.