European stocks wrapped up in negative territory Friday, with a selloff in Deutsche Bank AG pacing punishment among bank shares and helping to mark a second-straight losing week.

The Stoxx Europe 600 SXXP, +0.20% fell 0.7% to close at 337.82, with only the health-care group SXDP, -0.18% posting a notable gain.

Deutsche shares slapped lower: Financial stocks were the worst performing, helping to push the Stoxx Europe 600 Bank Index SX7P, -0.21% down 2.1%.

There, Deutsche Bank DBK, -0.96% DB, -2.39% shares stumbled 8.5%, wiping off roughly €1.5 billion from the German lenders’ market capitalization, according to FactSet data. The pummeling was set off by news late Thursday the U.S. Department of Justice asked Deutsche Bank to pay $14 billion to settle civil claims related to mortgage-backed securities.

That amount is close to the company’s €16.5 billion ($18.44 billion) market cap.

“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning,” the bank said in a statement.

The amount requested by the DOJ is “multiples above expectations,” and is being considered as a starting point for discussion between the two sides, said Jefferies equity analyst Joseph Dickerson.

But it does intensify the concerns around other European banks caught up in similar U.S. investigations, he added.

Royal Bank of Scotland and Barclays also traded lower, given these banks are also in discussion with the DOJ over similar claims, Dickerson said in a note. “Our estimates for RBS and Barclays assume a respective $2 billion and $1.1 billion of DOJ settlement costs.”

In London, Royal Bank of Scotland PLC shares UK:RBS US:RBS dropped 4.4%, while Barclays PLC BARC, -0.20% BCS, -1.26% fell 2.8%.

The moves weighed on the German and U.K. benchmarks. The DAX 30 DAX, +0.41% lost 1.5% to 10,276.17, with shares of Commerzbank AG CBK, -0.53% also lower, by 1.9%. The FTSE 100 UKX, +0.43% fell 0.3% to 6,710.28.

More indexes: The Stoxx 600 dropped 2.2% for the week, marking its worst weekly decline in three months, according to FactSet data.

The week was dogged by worries among investors that central banks are hesitant to continue pumping monetary stimulus into the financial system as part of efforts to bolster inflation rates and support economic growth. The Bank of Japan and the Federal Reserve will meet next week, with investors watching to see if the Fed will go against market expectations and raise interest rates. Higher rates could hurt European assets as investors search for richer yields in the U.S.

In Paris, the CAC 40 PX1, -0.40% gave up 0.9% to 4,332.45, and Spain’s IBEX 35 IBEX, -0.65% moved down 1% to 8,633.40.

Italy’s FTSE MIB XX:FTSEMIB fell 2.4% to 16,192.16, where shares of troubled lender Banca Monte dei Paschi di Siena BMPS, +3.87% lost 9.3%. This week, the company named Marco Morelli as its new chief executive following the ouster of CEO Fabrizio Viola.

The euro EURUSD, -0.08% was trading at $1.1157, compared with $1.1245 late Thursday.