The headquarters of Deutsche Bank are pictured in Frankfurt in this October 29, 2013 file picture. German banking regulator Bafin has demanded documents from Deutsche Bank as part of a probe into suspected manipulation of benchmark gold and silver prices by banks, the Financial Times reported, citing sources. Picture taken October 29, 2013. REUTERS/Ralph Orlowski/Files (GERMANY - Tags: BUSINESS)

Deutsche Bank shares are crashing after The Wall Street Journal reported that it has been asked to pay $14 billion to resolve a probe into mortgage securities.

Deutsche Bank shares slumped in after-hours trading in New York, falling more than 7%.

The report, from Aruna Viswanatha, Jenny Strasburg and Eyk Henning, said the US Justice Department proposed a “preliminary” figure for Deutsche Bank to settle a series of mortgage-securities probes.

The number is far beyond Deutsche Bank’s own expectations, according to The Wall Street Journal.

Deutsche Bank said in its second quarter earnings that it had 5.5 billion euros ($6.2 billion) in litigation reserves set aside.
Deutsche Bank said it expects to settle the matter at a much lower amount.

The bank said in a statement:

Deutsche Bank AG (XETRA – DBKGn.DE / NYSE: DB) confirms that it has commenced negotiations with the Department of Justice in the United States (“DoJ”) with a view to seeking to settle civil claims that the DoJ may consider in connection with the bank’s issuance and underwriting of residential mortgage-backed securities (RMBS) and related securitization activities between 2005 and 2007.

The bank confirms market speculation of an opening position by the DoJ of USD 14 billion and that the DoJ has invited the bank as the next step to submit a counter proposal.

Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts. –