According to sources with knowledge of the matter who recently spoke with the New York Times, U.S. state and federal authorities have initiated preliminary settlement talks with German Commerzbank AG (ADR) (OTCMKTS:CRZBY) (ETR:CBK) over the bank’s alleged illegal dealings with Iran and other blacklisted countries.
Commerzbank AG (ADR) (OTCMKTS:CRZBY) (ETR:CBK) is just the latest target of bank regulators in ongoing probes related to various matters that have already netted settlements from most major banks including Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM) and, most recently, BNP Paribas SA (ADR) (OTCMKTS:BNPQY) (EPA:BNP). Of note, the almost $9 billion BNP Paribas settlement included pleading guilty to criminal charges.
The ongoing investigation into the German banks has involved a variety state and federal regulators. The sources say the Manhattan district attorney’s office as well as New York State’s banking regulator, Benjamin M. Lawsky, have been collaborating with the Justice Department’s criminal division in Washington, the United States attorney’s office for the District of Columbia and the Federal Reserve on the case.
Details on the possible deal
Germany’s second largest bank is alleged to have illegally transferred money through its American operations for companies in both Iran and Sudan. The NYT source suggests the bank is likely to reach a settlement deal with the state and federal authorities within the next few months.
The settlement is anticipated to include at least $500 million in penalties for Commerzbank AG (ADR) (OTCMKTS:CRZBY) (ETR:CBK). Although prosecutors were still considering their alternatives, Commerzbank will probably be looking at a deferred prosecution agreement, which would forego criminal charges in exchange for the financial penalty and commitments to improve compliance.
Commerzbank settlement might pave the way for Deutsche Bank deal
Financial industry analysts point out that regulators reaching a deal with Commerzbank AG (ADR) (OTCMKTS:CRZBY) (ETR:CBK) is also likely to pave the way for a settlement with Deutsche Bank AG (NYSE:DB) (ETR:DBK), the largest bank in Germany, who is alleged to have committed similar infractions. Sources say investigators are also looking into whether Credit Agricole SA (EPA:ACA) (OTCMKTS:CRARY) and Societe Generale SA (EPA:GLE) (OTCMKTS:SCGLY) were also involved in violating U.S. sanctions.