Barclays to pay US$2b U.S. fine over mortgage fraud claims

Barclays to pay US$2b U.S. fine over mortgage fraud claims

Barclays to pay US$2b U.S. fine over mortgage fraud claims

Federal prosecutors also reached settlements with two former Barclays executives over their roles in the sale and trading of residential mortgage-backed securities (RMBS), a type of investment derivative that bundled home loans into securities sold to investors.

Additionally, the Department of Justice reached similar settlements with two Barclays' employees involved with subprime residential mortgage-backed securities.

The Barclays settlement is one of the lower payouts made by banks facing such claims, with Credit Suisse agreeing in December 2016 to pay out a combined $5.3 billion in settlements and consumer relief, while Deutsche Bank settled for $7.2 billion in January a year ago.

Donoghue, US Attorney for the Eastern District of NY, said: "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".

The company "systematically and intentionally misrepresented key characteristics of the loans it included" in 36 RMBS deals worth $31 billion, the Justice Department said at the time.

The agreement settles a civil action filed in December 2016 in which the USA sought civil penalties for alleged conduct related to Barclays' underwriting and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.

In exchange for payment of the fine, the Justice Department will withdraw a civil complaint filed against the Barclays in December 2016, leaving the bank with a clean record in the case.

Barclays CEO Jes Staley called it a "fair and proportionate settlement".

British bank Barclays became the latest big bank to reach a multi-billion dollar settlement with US authorities over its role in the subprime mortgage bubble and subsequent financial crisis.

Noting that the bank completed restructuring in 2017, Staley said Barclays has put "significant legacy matters like this one behind us".

The bank last month reported a £1.9bn loss for 2017 after United States tax reforms and an accounting write-down from the sale of its Africa businesses resulted in big one-off charges.

Barclays said it remains its intention to pay a dividend of 6.5 pence for 2018. Barclays has said it intends to defend itself in court on those charges as well.

Carroll is pleased the government "relented in its efforts to prove wrongdoing where none exists", lawyer Glen McGorty said in an emailed statement. In general, the borrowers whose loans backed these deals were significantly less creditworthy than Barclays represented, and these loans defaulted at exceptionally high rates early in the life of the deals.

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