Deutsche Bank AG and Citigroup Inc. agreed to pay $165.5 million to resolve U.S. regulatory claims over sales of mortgage-backed securities to credit unions that later failed, the National Credit Union Administration said.
The agreements, aimed at reducing losses stemming from the collapses of five federally insured credit unions, were announced by NCUA in statements Monday. Deutsche Bank, Germany’s biggest lender, will pay $145 million, and New York-based Citigroup reached a $20.5 million settlement. Neither bank admitted fault, the Alexandria, Virginia-based regulator said.
NCUA, which has filed four lawsuits alleging violations in the sale of mortgage-backed securities, said it is the first regulator to recover losses on behalf of failed firms. The payments from Deutsche Bank and Citigroup will be used to reduce assessments levied on credit unions to cover losses from the collapsed credit unions, the agency said.
“We are fulfilling our statutory responsibility to secure maximum recoveries for credit unions and ensure that consumers remain protected,” NCUA Board Chairman Debbie Matz said in a statement. “Deutsche Bank Securities is among the first major underwriters to come forward with a settlement proposal and we appreciate its efforts to resolve potential claims so that we can avoid the expense and delay of litigation.”
In August, NCUA sued Goldman Sachs Group Inc. seeking $491 million to recover losses on mortgage-backed securities. That complaint, filed in Los Angeles, was the fourth in a series of suits aimed at recovering almost $2 billion from “sellers and underwriters of questionable securities,” NCUA said at the time. The agency, which had earlier sued Royal Bank of Scotland Group Plc and JPMorgan Chase & Co., said at the time that it expected to file five to 10 such cases.
The final loss to the federal credit union system is expected to be between $1.8 billion and $6.1 billion, David Small, an NCUA spokesman, said today in an e-mail.
“We are pleased to have resolved the NCUA’s claims without the parties having to resort to litigation,” said Duncan King, a Deutsche Bank spokesman. “Citi is pleased to have resolved this matter,” Danielle Romero-Apsilos, a spokeswoman for Citigroup, said in an e-mail.
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