Barclays to Pay $2 Billion to Resolve Mortgage Securities Claims -- Update

By Adam Clark 

U.K. lender Barclays PLC has agreed to pay $2 billion in civil penalties to resolve claims of fraud in the sale of residential mortgage-backed securities in the run-up to the financial crisis, the Justice Department said on Thursday.

The department said the settlement will dismiss a civil action filed in December 2016, which alleged Barclays caused billions of dollars in losses to investors in deals involving over $31 billion of securitized mortgage loans between 2005 and 2007.

Barclays is the latest big bank to reach a settlement over residential mortgage-backed securities. Bank of America Corp., Goldman Sachs Group Inc. and Deutsche Bank AG have all reached multibillion-dollar settlements in recent years.

The settlement removes a major uncertainty that has hung over the bank's stock valuation for months.

On Thursday, Barclays Chief Executive Jes Staley said, "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."

The filed complaint alleged that Barclays misrepresented key characteristics of the loans, with the borrowers being significantly less creditworthy than represented, leading to exceptionally high default rates early in the life of the deals.

An agreement has also been reached with former Barclays executives Paul Menefee, former head banker of subprime RMBS securitizations, and John Carroll, former head trader for subprime loan acquisitions. The two former executives have agreed to pay a combined $2 million in civil penalties.

(END) Dow Jones Newswires

March 29, 2018 10:09 ET (14:09 GMT)

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