Barclays to pay $2B to U.S. to settle mortgage suit

Barclays bank

Paul Menefee, who served as the lead banker of its subprime RMBS securitisation unit, and John Carroll, who worked as the head trader for subprime loan acquisitions will pay a total of $2m.

The fine is the latest in a long line of penalties issued by American and British financial watchdogs relating to banks' conduct before the crash in 2008.

Last month, Britain's Serious Fraud Office announced charges against Barclays Bank over emergency fundraising from Qatar during the financial crisis - adding to charges against parent company Barclays PLC and four former top executives.

The scheme alleged in the complaint involved 36 RMBS deals in which over $31 billion worth of subprime and Alt-A mortgage loans were securitized, more than half of which loans defaulted. It is also much less than the $7 billion that Deutsche Bank and $5 billion that Credit Suisse paid.

The Justice Department said Barclays misled investors about the quality of the mortgage loans and committed mail fraud, wire fraud, and other allegations.

"The substantial penalty Barclays and its executives have agreed to pay is an important step in recognizing the harm that was caused to the national economy and to investors", Richard Donoghue, the U.S. attorney in Brooklyn, New York, said in a statement.

The bank's 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".

Barclays Capital and some of its affiliates have agreed to pay a hefty $2 billion fine for improperly selling securities backed by home mortgages, according to a report. "The sanction is substantial", he says, while pointing out that fact that he accepts to pay this amount represents "an important step in recognizing damage that caused economy and investors".

Staley said that, because of the settlement and a 2017 restructuring, Barclays is "well positioned" to ramp up profits and return a greater share of its profit to shareholders.

Barclays' settlement could encourage its rival Royal Bank of Scotland, which has been frustrated by a lack of progress in settling its own case that is blocking the bank from resuming dividend payments.

USA federal authorities have faced public outrage and hostile scrutiny from lawmakers over the perceived failure to bring criminal cases against any senior bank executives for their roles in sparking the crisis - despite a Justice Department finding that industry practices involved widespread fraudulent conduct.

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