Deutsche Bank to fight $14bn US fine as shares plunge
Embattled Deutsche Bank has been told to pay $14bn fine by the US Department of Justice to settle an investigation into the German bank's selling of mortgage-backed securities; shares plunged 8% as a result. The bank says it will fight the near-record demand, which far outstripped expectations; the lender has not said how much it had set aside in anticipation of a settlement. This fine puts further strain on Deutsche Bank's already fragile position and will rock investor confidence. As we have been noting, Deutsche Bank is already on the verge of a crisis which could have far-reaching implications globally, particularly in Germany where its importance is many times greater than Lehman Brothers was to the US in 2008. 
16 Sept 2016 15.46 BST And finally.... there’s no let- up on the anxiety in the banking sector this afternoon. Deutsche Bank shares are hitting new lows, down almost 9% in late trading, in its worst day since Britain voted to leave the EU. Jasper Lawler of CMC Markets explains: “The decline in DB shares was the biggest since the day after the Brexit vote. The fine would be to settle an investigation into the mis-selling of US mortgage backed securities. The $14bn would be about 80% of Deutsche Bank’s market cap and may dissuade employees from following CEO John Cryan’s recent advice to “be more daring.” Royal Bank of Scotland has shed 5% – pushed down by fears that it could incur a whopping fine from the DoJ too (as explained this morning). Many other European banks have shed two or three percent, in a new bout of jitteriness about the banking sector. Deutsche Bank -8.8%

Credit Suisse -5.2%

RBS -4.5%

UBS -2.9%

Barclays -2.8%



Latest update: https://t.co/rWZTgW9Urq pic.twitter.com/qybyq9uMT8 — Bloomberg (@business) September 16, 2016 That’s all for today, and indeed this week. Have a good weekend, and see you on Monday! GW



16 Sept 2016 15.42 BST Grexit is no more!! Wall Street firm Citi has told clients today that it no longer thinks Greece will leave the eurozone in the next three years. Despite the latest tensions between Athens and its creditors, they reckon its bailout programme will remain intact. GREXIT NO MORE. Citi no longer thinks Greece will exit the eurozone, after years of predicting it will happen. pic.twitter.com/ZHS5Wlpa1C — Robin Wigglesworth (@RobinWigg) September 16, 2016 Readers may remember that Citi actually dreamed up the term Grexit in 2012, when chief economist William Buiter said there was a 90% chance the country would leave the eurozone. That prediction proved incorrect; will today’s recantation come back to bite them? @RobinWigg uh oh — Matthew C. Klein (@M_C_Klein) September 16, 2016



16 Sept 2016 15.16 BST Handelsblatt: $14bn fine would be 'minor catastrophe' for Deutsche Philip Oltermann The German newspaper Handelsblatt describes the proposed $14bn settlement as a “cold shower” for Deutsche Bank. “Such a large sum would amount to a minor catastrophe: if the bank had to raise the fine out of its capital, it would shrink its equity ratio to single digits, perhaps eight percent. For a bank of this calibre and complexity, this would be unacceptable and would practically force a capital increase”



16 Sept 2016 15.07 BST Standard & Poor’s has a glimmer of good news for Deutsche Bank - it isn’t planning to downgrade its credit rating, despite the threat of a $14bn settlement with the DoJ. S&P currently rates Deutsche Bank as BBB+ with a negative outlook, and says this is “not immediately affected by reports that it is negotiating a settlement with the U.S. Department of Justice”. S&P also expects that Deutsche will end up paying more than it has currently set aside to cover litigation costs, even if it avoids the full $14bn bill. Deutsche Bank held €5.5 billion of litigation reserves on June 30, 2016, and identified a further €1.7 billion of unreserved contingent litigation liabilities. The latter are defined as obligations that can be estimated and where a loss is considered less than probable, but more than remote. Our capital and earnings forecasts anticipate the crystallization of this contingent liability, with additional charges on top.



16 Sept 2016 14.47 BST Backstage ahead of the Clio Peppiatt installation during London Fashion Week today. Photograph: Tabatha Fireman/Getty Images The Brexit vote is cast a shadow over London Fashion Week, where top designers fear being frozen out of the European market. Caroline Rush, chief executive of the British Fashion Council, says its “vitally important” that Britain maintains access to the single market. Rush says: “We need to ensure that our changing relationship with the EU will not impact on the creativity of London, our access to new talent overseas or the ongoing education and training programmes we support.” The EU referendum has delivered some benefits to the industry, though - sales to tourists should rise thanks to the weak pound. London Fashion Week organiser makes single market plea Read more

Updated at 14.48 BST

16 Sept 2016 14.31 BST The US Federal Reserve is still unlikely to raise rates at its meeting next week, despite this pickup in inflation. But FXTM research analyst Lukman Otunuga reckons the Fed could easily hike in December: Dollar bulls were offered a lifeline on Friday following the impressive US inflation data which rekindled optimism over the Federal Reserve raising US rates this year. CPI for August printed at 0.2% while Core CPI ticked higher at +0.3% simply elevating sentiment towards the US economy. With inflationary pressures building up gradually in the world’s largest economy, the Fed may have been provided a compelling reason to act before year end. Although expectations have withered over September being a live meeting to pull the trigger, the hope of December being a possibility to act could keep the Dollar buoyed.



16 Sept 2016 13.38 BST US inflation beats forecasts Just in: America’s inflation rate has risen by more than expected, reigniting the debate on whether US interest rates should rise. Consumer prices rose by 0.2% month-on-month in August, higher than the 0.1% economists expected. That’s also an increase on July, when prices were unchanged during the month. Although fuel prices fell, rents and healthcare costs pushed up the cost of living. The annual rate of inflation also picked up, giving ammunition to those who think the Federal Reserve should raise interest rates. On an annual basis, prices rose by 1.1% last month - up from 0.8% in July. And core inflation, which strips out volatile elements like fuel and food, rose to 2.3%.

US Consumer Price Index rose 0.2% in Aug vs. 0.1% increase expected https://t.co/hZkVTuzr9I — CNBC Now (@CNBCnow) September 16, 2016 *U.S. AUGUST CONSUMER PRICES RISE 0.2%; CORE RATE RISES 0.3% — lemasabachthani (@lemasabachthani) September 16, 2016

Updated at 13.47 BST

16 Sept 2016 13.11 BST The German government has now weighed in over the Deutsche Bank issue, saying it expects its largest bank to be treated “fairly” by US authorities. Finance Ministry spokeswoman Friederike von Tiesenhausen also flagged up that the settlement process isn’t over, even though the DoJ want Deutsche to pay a $14bn settlement. She told reporters that: “The government is aware that the U.S. authorities have agreed similar settlement payments with other credit institutions. The government expects that at the end of this process a fair result will be achieved on the basis of equal treatment. (thanks to Reuters for the quote) Meanwhile Deutsche executives have been trying to reassure investors that it won’t be forced to raise fresh capital: #DeutscheBank Head of Comms:We have a comfortable capital cushion. No need to raise capital. No plans for fire sales — Carolin Roth (@CarolinCNBC) September 16, 2016

Updated at 13.18 BST