Deutsche Bank and Credit Suisse will pay a collective $12.5bn (£10.2bn) to bring to an end claims flowing from a major US investigation linked to the sale of toxic mortgage-backed securities in the run-up to the financial crisis.
Deutsche, which had been linked to a $14bn settlement, will pay a total of $7.2bn to settle the US Department of Justice's claims, which follow a lengthy investigation into the sale of the investments across the entire banking industry.
The German bank will pay a $3.1bn fine and provide a further $4.1bn in consumer relief in the form of loan modifications and other assistance to homeowners and borrowers.
It will be viewed as a successful negotiation by John Cryan, Deutsche's chief executive, who came under fire in the Autumn when reports suggested his bank may have to pay as much as $14bn to settle, which could have caused capital issues.
As it stands, the agreement, which has yet to be finally approved, will mean Deutsche, which had already put in place a series of provisions for the mis-selling, will post a pre-tax charge of $1.17bn in the fourth quarter of the year.
Credit Suisse has reached a $5.28bn settlement, made up of a $2.48bn fine and $2.8bn in relief.
The settlement will be a relief for Tidjane Thiam, chief executive of the Swiss bank, who had already set aside $2.1bn in litigation provisions by the end of the third quarter.
Peter Casanova, analyst at Kepler Cheuvreux said the largest remaining uncertainty surrounding Credit Suisse had now been removed.
Analysts suggested the deal could be good news for the Royal Bank of Scotland, which has yet to settle with the DoJ over similar claims.
James Leigh-Pemberton, chairman of UK Financial Investments which manages the Government's 73pc stake in RBS, said before a House of Commons committee last month that the fine “might be $5bn, it might be $12bn”.
Meanwhile it was not such good news for Barclays, which now faces a high profile court case after failing to settle.
The DoJ has filed a civil complaint in a New York court which accuses the British bank and employees of misrepresenting the quality of loans they sold to tens of thousands of investors between 2005 and 2007 in the run-up to the country's financial meltdown.
The DoJ claims that investors, which included credit unions, pension plans and university endowments, lost billions of dollars.
The lender falsely assured investors that it had excluded "unacceptable" loans, and that it had conducted due diligence on the loan pools it had securitised, according to the complaint.
Two former Barclays bankers - John T Carroll and Paul Menefee - were named as individual defendants in the lawsuit accused of playing key roles in the alleged fraud.
The DoJ has not specified a sum it is seeking from Barclays for settling the action.
"Barclays jeopardised billions of dollars of wealth through practices that were plainly irresponsible and dishonest," said US Attorney General Loretta Lynch.
"We are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people.”
In the lawsuit, filed in federal court in Brooklyn, the DoJ alleges that the bank deceived investors about the quality of more than $31bn in loans sold between 2005 and 2007.
It alleges more than half of the underlying loans defaulted, with the complaint saying that consultants who reviewed the loans called them 'craptacular.'
The complaint goes on to allege that Barclays' efforts contributed to the US housing bubble and subsequent crash, which triggered the financial crisis of 2008.
The lawsuit will put the British bank on a collision course with the incoming Trump administration, and the case is likely to be one of the first high profile cases involving it and an overseas company.
A Barclays spokesman said: "Barclays rejects the claims made in the complaint. Barclays considers that the claims made in the complaint are disconnected from the facts.
"We have an obligation to our shareholders, customers, clients and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity."
Glen G McGorty of Crowell & Moring, representing John Carroll, said: "It is surprising and extremely disappointing that the government decided to file this highly unusual lawsuit. John Carroll intends to challenge these ill-conceived and baseless allegations, and expects to be fully vindicated."
The DoJ's investigation into mortgage-backed securities began in 2013. It has long alleged that the securities were promoted as safe investments in the lead-up to the housing market crash, but were in fact bundles of mortgages from borrowers who were unlikely to be able to repay their loans.
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