NEW YORK: Already hobbled by a weak capital base, Deutsche Bank finds itself in the crosshairs of US prosecutors, who have proposed $14 billion in fines over its role in the 2008 financial crisis.
However, given its size and importance, US authorities may be wary of destabilizing the global financial system by penalizing Germany's largest bank too heavily and endangering its survival -- something the bank may use to its advantage in pending settlement talks, attorneys say.
Deutsche Bank, which federal prosecutors believe knowingly sold toxic mortgage-backed securities between 2006 and 2008, this month publicly rejected the proposed settlement amount, saying it had "no intent" of agreeing to a sum "anywhere near" that amount.
Going public with their position is a rare move to be as open as possible at a time when the bank appears worryingly weak, according to a source with knowledge of the matter."
The bank's share price has tumbled 50 percent since the beginning of the year, bringing its market value below $17 billion. Citigroup, by comparison, is currently valued at $135 billion.
A large fine could drag the company's common equity tier-one ratio, now at 10.8 percent, below the psychological threshold of 10 percent, according to Stephen Ellis of MorningStar.
This, and other question marks over the bank's longer-term viability, have investors deeply worried.
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