By Joshua Franklin, Oliver Hirt and Karen Freifeld
ZURICH/NEW YORK (Reuters) - The U.S. Department of Justice has asked Credit Suisse
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 has been pushing for a smaller penalty.
"Credit Suisse is confident of reaching a better solution," said the person with knowledge of the discussions. 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 talked with top management from Credit Suisse, another person familiar with the matter said, adding that a resolution could come as soon as this week.
None of the sources were authorized to speak publicly about the talks.
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Credit Suisse and the Department of Justice declined to comment.
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 1930s.
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 financial crash.
After record settlements were reached with U.S. banks such as Bank of America
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
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 matters.
President-elect Donald Trump will take office on Jan. 20, which means key government players involved in the negotiations would change, complicating the banks' efforts to reach settlements.
(Editing by John O'Donnell, Carmel Crimmins and James Dalgleish)
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