Barclays to pay £1.4bn settlement after probe

BARCLAYS has reached a $2bn (£1.4bn) 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.

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 $2m (£1.4m).

Paul Menefee served as the head banker of Barclays’ subprime RMBS securitisation unit, and John Carroll was head trader for sub-prime loan acquisitions.

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.”

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 he welcomed the “fair and proportionate settlement”.