Bank pays $2.8b to settle charges

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.

But in a rare and notable move, US authorities went further to fine two individual bankers as part of their alleged role in the subprime mortgage crisis.

Barclays agreed to pay US$2 billion ($2.8b) in civil penalties to settle charges that it sold fraudulent mortgage-backed securities to investors between 2005 and 2007, and that it misled investors on the quality of those loans that it sold to the public.

Barclays was one of the last holdouts of the big banks.

Two former Barclays executives will pay fines as well.

Paul Menefee, a banker who helped package subprime mortgages into securities, and John Carroll, who was the bank’s head trader of mortgage-backed securities, will pay a combined US$2 million in fines in exchange for having the charges against them being dismissed.

It has been rare for US authorities to charge Wall Street bankers for their alleged role in the subprime housing bubble.

The Justice Department originally sued Barclays and several of its US affiliates in late 2016 over the sale of risky mortgage-backed securities.

Barclays chief executive Jes Staley said in a statement that the settlement was “fair and proportionate”.

“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,” said US Attorney Richard Donoghue for the Eastern District of New York.