Germany 'prepares Deutsche Bank rescue'

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The German government and financial authorities are working on a rescue plan for Deutsche Bank in case it cannot pay fines in the US, according to Die Zeit newspaper.

Germany's biggest lender is facing a $14bn (£10.8bn; €12.5bn) bill for mis-selling mortgage-backed bonds before the financial crisis of 2008.

In the worst-case scenario, the government would even take a 25% stake in the bank, according to the article.

Deutsche Bank has denied the report.

In a statement, the German finance ministry stressed: "This report is false. The federal government is preparing no rescue plans. There is no reason for such speculation. The bank has said that clearly."

Die Zeit wrote that "despite earlier denials", the rescue plans were being prepared and would come into force if the bank needed additional capital to pay the fine and could not raise the money from the markets.

The record fine was imposed by the US Department of Justice earlier this month and is nearly triple the amount Deutsche had put aside to cover the payout.

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The level of the fine is seen as an opening gambit and it is not expected that the bank will have to actually pay $14bn. Chief executive John Cryan told the Bild newspaper that it had been clear from the beginning that the bank would not pay that amount.

Under the rescue plan, Die Zeit said, if the bank really could not pay the fine by itself, then it would be able to sell parts of its business to other financial institutions at prices set at such a level that the burden on Deutsche was eased and it would not make any significant losses.

That could happen, said the newspaper, if the businesses were going to have to be sold at clearly less than their value. In an emergency, those transactions could be supported by state guarantees, it added.

Separately, on Wednesday, Phoenix Group Holdings, the UK's biggest owner of life assurance funds closed to new customers, announced it would buy Deutsche Bank's UK insurance business Abbey Life Assurance for £935m ($1.22bn).

Die Zeit also made clear that the government still hoped the bank would be able to manage without state backing.

Shares in Deutsche are down by more than 50% this year. On Monday and Tuesday, they fell to new lows as a result of concerns about how it will manage the fine. But in Wednesday trading, they rose by more than 2.5%.

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