Barclays has agreed a $2bn (£1.4bn) settlement with the US Department of Justice over claims that it mis-sold mortgage-backed securities in the run-up to the financial crisis.
The fine draws a line under a major misconduct issue that had been hanging over the bank after it decided in 2016 to contest the far higher sum that the DoJ was reportedly seeking.
Barclays chief executive Jes Staley said it was a “fair and proportionate settlement” and it is likely to be seen as a vindication of his decision to play hardball with US authorities.
The DoJ had been thought to be going for a sum closer to the $7.2bn penalty agreed by Deutsche Bank or $5.3bn by Credit Suisse, both at the start of last year, over similar claims.
The department’s civil action against Barclays alleged that the bank caused billions of dollars in losses to investors through a fraudulent scheme to sell 36 bundles of toxic mortgage assets between 2005 and 2007.
It was alleged that it misled those investors about the quality of the home loans backing those deals. The DoJ said more than half of the mortgages defaulted.
In addition to the bank’s fine, two US-based former Barclays employees have agreed to pay penalties totalling $2m. The penalties for Barclays and the individuals follow a three-year investigation.
Mr 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.”
Mr Staley said by “putting significant legacy matters” behind it as well as completing its restructuring last year, Barclays was “well positioned to produce stronger earnings going forward”.
The bank said it “resolves all actual and potential civil claims by the DoJ relating to Barclays’ securitisation, underwriting and sale of mortgage-backed securities sold by Barclays between 2005 and 2007”.
Richard Donoghue, US 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.”
The bank last month reported a £1.9bn loss for 2017 after US tax reforms and an accounting write-down from the sale of its Africa businesses resulted in big one-off charges.
Major US lenders have already agreed penalties over mortgage-backed security allegations in recent years while HSBC, UBS and Royal Bank of Scotland are still waiting their turn.
For RBS, which remains more than 70% taxpayer-owned, a long-awaited settlement will be a hugely significant milestone as the beleaguered bank aims to return to normality by re-starting dividend pay-outs, making it easier to start returning the lender to the private sector.
From – SkyNews