Barclays has reached a two billion US dollar (£1.4 billion) settlement with the US Department of Justice (DOJ) relating to the sale of mortgage-backed securities in the lead up to the financial crisis.
It follows a three-year investigation into allegations that Barclays caused billions of dollars of losses to investors by “engaging in a fraudulent scheme” to sell Residential Mortgage-Backed Securities (RMBS) between 2005 and 2007.
The bank was said to have misled investors about the quality of the mortgage loans backing those deals.
A branch of Barclays, in central London (PA)
The DOJ 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.
Two former Barclays executives have also reached a combined settlement of two million US dollars (£1.4 million).
They are Paul Menefee, who served as the head banker of Barclays’ subprime RMBS securitisation unit, and John Carroll, who worked as the head trader for subprime loan acquisitions
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.”
Barclays shares edged down in the wake of the announcement.
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