(Repeats to more subscribers)
* U.S. probes Credit Suisse over toxic mortgage debt
* Department of Justice proposed $5 bln-plus penalty -
* Credit Suisse resisted this demand - source
(Adds state lawsuits)
By Joshua Franklin, Oliver Hirt and Karen Freifeld
ZURICH/NEW YORK, Dec 20 The U.S. Department of
Justice has asked Credit Suisse to pay between $5
billion and $7 billion to settle a probe over its sale of toxic
mortgage securities in the run-up to the 2008 financial crisis,
a source with knowledge of the matter said, but the bank has
resisted settling for that amount.
The size of the suggested settlement indicates that the cost
to the bank may be higher than analysts had expected and
explains why Credit Suisse management, according to a second
source, has been seeking a smaller penalty.
"Credit Suisse is confident of reaching a better solution,"
said the second person. Should talks break down, U.S. legal
authorities could sue the bank, prolonging the uncertainty.
In a sign that negotiations may be reaching their final
stages, U.S. Attorney General Loretta Lynch last week met with
Credit Suisse chief executive Tidjane Thiam, another person
familiar with the matter said.
A potential resolution could come as early as this week.
The sources did not want to be identified because the
negotiations are not public.
Credit Suisse and the Department of Justice declined to
The penalty stems from a 2012 initiative launched by U.S.
President Barack Obama to hold banks accountable for selling
mortgage debt while misleading investors about the risks, a
practice that helped cause the worst economic crisis since the
The penalties, which for U.S. banks reached $46 billion, are
set to deliver another setback to European lenders, many of
which remain fragile, with scant capital, in the wake of the
After record settlements were reached with U.S. banks such
as Bank of America and JPMorgan, the focus has
turned to Europe's Deutsche Bank, Royal Bank of
Scotland, Credit Suisse, Barclays, UBS
News in September that the Justice Department made an
initial demand of Deutsche of $14 billion to settle its case
sent the German lender's stock plummeting and raised fears
Credit Suisse could also face a stiffer penalty.
Just prior to Deutsche confirming that the Department of
Justice was seeking $14 billion, JP Morgan analysts estimated
Credit Suisse's fine at around $2 billion.
Deutsche Bank could this week agree its penalty
over the sale of toxic mortgage debt, one person with direct
knowledge of the matter said on Monday. The bank has said it
expects to pay materially less than $14 billion.
Credit Suisse's litigation provisions at the end of 2015
totalled 1.605 billion Swiss francs ($1.56 billion). In
November, the bank said it had upped litigation provisions by
357 million francs, mainly in connection with mortgage-related
In addition to the Justice Department probe, Credit Suisse
is defending itself against lawsuits by the New York and New
Jersey attorneys general over similar claims involving billions
of dollars of investor losses.
If Credit Suisse reaches a settlement with federal
authorities, it will likely settle with the states as well.
A New York attorney general spokeswoman declined to comment,
and New Jersey did not immediately return a call for comment.
President-elect Donald Trump takes office on Jan. 20, which
means key government players involved in the negotiations would
change, complicating the banks' efforts to reach settlements.
($1 = 1.0277 Swiss francs)
(Editing by John O'Donnell, Carmel Crimmins and James