Deutsche Bank stocks dip after rejecting $14B U.S. deal

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Many financial institutions were investigated about issuing and underwriting of residential mortgage-backed securities in the run-up to the 2008 financial crisis.

People in the USA aspiring to buy homes were given loans. The cost of insuring the bank's debts against default jumped to about 8 percent. Loans were approved anyway.

Investors took flight from banking stocks amid concerns over the regulatory risk for the sector. Investors mulled mixed economic reports seeking clues about the Federal Reserve's intentions and the health of the economy.

Once the housing market boom collapsed, a chain reaction of financial losses set in.

While many big banks have shunned him, Deutsche Bank AG has been a steadfast financial backer of the Republican presidential candidate's business interests.

DEUTSCHE BANK: The U.S. -listed shares of Deutsche Bank, the German financial conglomerate, plunged $1.30, or 9 percent, to $13.46 after the bank said it did not intend to pay the $14 billion settlement that the Department of Justice had proposed.

"There may be opportunity for Deutsche Bank management to negotiate the fine down, but even around $10 billion it would necessitate a capital raise", Andrew Lim and other analysts at Societe Generale said in a note, confirming their "sell" rating. "The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts", the bank said in a statement.

The headquarters of Germany's Deutsche Bank is photographed early evening in Frankfurt.

It is expected that Deutsche Bank will end up paying anywhere from $4 to $7 billion euros.

The figure would be one of the highest settlements paid by a bank to resolve similar lawsuits.

"True, the final sum is unlikely to be as high as the $14bn claim, but somewhere around a third of that would seem par for the course".

In other news, the Central Bank of Russian Federation cut its key interest rate by 50 basis points to 10 percent on Friday, "given the inflation slowdown, in line with the forecast, decrease in inflation expectations and unstable economic activity", the central bank said.

"Deutsche Bank is saying 'no way, no how we pay $14 billion, '" FBN's Elizabeth MacDonald noted. Investors will instead look for clues on when the central bank will eventually pull the trigger.

In 2014, U.S. bank Citigroup settled a probe into mortgage-backed securities for $7bn (£5bn) while in a similar case this year, Goldman Sachs agreed to pay $5bn (£4bn).