Barclays to pay $2bn to settle claims over sale of mortgage-backed securities - US DoJ
Barclays has agreed to pay $2bn in civil penalties to settle claims over the sale of mortgage-backed securities in the lead up to the financial crisis, the US Department of Justice has said.
According to the terms of the settlement, two former Barclays executives have also agreed to pay $2m to resolve claims brought against them individually.
It relates to Barclays' underwriting and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.
Barclays will pay the penalty in exchange for dismissal of the DoJ's complaint against the British lender.
The DoJ alleged that Barclays caused billions of dollars in losses to investors by engaging in a "fraudulent scheme" to sell 36 RMBS deals, and that it misled investors about the quality of the mortgage loans backing those deals.
It alleged violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on mail fraud, wire fraud, bank fraud, and other misconduct.
The two former Barclays executives named as defendants in the suit are Paul Menefee, who was the lender's head banker on its subprime RMBS securitisations, and John Carroll, who served as head trader for subprime loan acquisitions.
In exchange for dismissal of the claims against them, the pair have agreed to pay two million US dollars in civil penalties.
Richard Donoghue, United States Attorney for the Eastern District of New York, said: "This settlement reflects the ongoing commitment of the Department of Justice, and this Office, to hold banks and other entities and individuals accountable for their fraudulent conduct.
"The substantial penalty Barclays and its executives have agreed to pay is an important step in recognising the harm that was caused to the national economy and to investors in RMBS."
Barclays said the settlement resolves "all actual and potential civil claims by the DoJ" relating to securitisation, underwriting and sale of mortgage-backed securities in the period 2005-2007.
Chief executive Jes Staley said: "I am pleased that we have been able to reach a fair and proportionate settlement with the Department of Justice.
"It has been a priority for this management team from the start to resolve these historic issues in a timely and appropriate manner wherever possible.
"The completion of our restructuring in 2017, and putting significant legacy matters like this one behind us, mean Barclays is well positioned to produce stronger earnings going forward, and to start returning a greater proportion of those earnings to our shareholders over time.
"Accordingly, it remains our intention to pay a dividend of 6.5 pence for 2018."