Deutsche Bank AG faces a US class-action lawsuit amid signs of a broadening backlash by mortgage-backed securities clients seeking to recoup losses tied to the credit crisis.
But Deutsche tried to distance itself today from a political and regulatory whirlwind sweeping Wall Street by revealing it had not been informed by the US Securities and Exchange Commission (SEC) of any imminent charges.
The class-action suit comes as Goldman Sachs prepares to appear at US Senate hearings seeking to establish the role of investment banks during the financial crisis.
In its first-quarter report, Germany's biggest lender said Federal Home Loan Bank of San Francisco had filed suit regarding the role a number of financial institutions, including Deutsche Bank affiliates, had played as issuer and underwriter of certain mortgage pass-through certificates.
"In addition, certain affiliates of Deutsche Bank ... have been named in a putative class action pending in the United States District Court for the Eastern District of New York regarding their roles as issuer and underwriter of certain mortgage pass-through securities," it said.
"On April 5th 2010, the court granted in part and denied in part Deutsche Bank's motion to dismiss this complaint. Each of the civil litigations is otherwise in its early stages."
Deutsche said it was unaware of any imminent action against the German bank by the SEC, which is reviewing whether other banks may have done the kinds of deals that landed Goldman in hot water.
Robert Khuzami, the SEC's director of enforcement, has said the agency was "looking very closely at these products and transactions".
Khuzami was once Deutsche Bank's general counsel for the Americas and from 2002 to 2004 headed Deutsche's litigation and regulatory investigations. He would have to recuse himself from any potential investigation of Deutsche Bank.
"We have not received a Wells notice," Deutsche Bank chief financial officer Stefan Krause told analysts during a conference call on first-quarter earnings.
Regulators send so-called Wells notices to firms or people to alert them of the likelihood that the U.S. government will file an enforcement action against them.
This gives targets the right to argue why they should not be charged by filing a "Wells submission".
In its quarterly report, Deutsche Bank reiterated it had got subpoenas and requests for information from regulators and governments concerning its role in the origination, purchase, securitisation, sale and trading of asset-backed securities, asset-backed commercial paper and credit derivatives.
This included residential mortgage-backed securities, collateralised debt obligations (CDOs) and credit default swaps.
"Deutsche Bank is cooperating fully in response to those subpoenas and requests for information," the company said.
Mr Krause said the subpoenas were not related to any current issues.
"We have done our internal review of our transactions. We do not feel that we have any similar situation to the one that is being discussed," he said.
The comments come ahead of a hearing later today by the US Senate's Permanent Subcommittee on Investigations into the role of investment banks in the financial crisis.
The hearing is shaping up as a trial of Goldman's business practices and comes as the US bank battles a fraud suit by the SEC and the Senate weighs a massive bill to overhaul financial regulation.
Goldman Sachs and chief executive Lloyd Blankfein were hit with a shareholder lawsuit claiming they hid key details about a risky transaction that resulted in civil fraud charges and a plummet in its stock price.
Reuters