Barclays to pay USD2b to settle mortgage securities suit

Barclays Plc agreed to pay USD2 billion in civil penalties to settle a U.S. investigation into its marketing of residential mortgage-
backed securities between 2005 and 2007.

The investigation targeted 36 RMBS deals involving $31 billion worth of loans, more than half of which defaulted, the Justice Department said in a statement yesterday. In addition, two former executives at the bank – Paul Menefee and John Carroll – agreed to pay $2 million to resolve claims against them without admitting wrongdoing.

“In general, the borrowers whose loans backed these deals were significantly less credit-worthy than Barclays represented,” the Justice Department said in a statement.

The London-based bank was said in 2016 to press to keep any settlement to $2 billion. The Justice Department balked and sued that December. It was a rare move as big banks typically negotiate a settlement before it reaches that point rather than risk a public trial.

Barclays Chief Executive Officer Jes Staley welcomed the deal in a statement and called it “a fair and proportionate settlement.” Staley said the bank remained committed to paying a 6.5 pence dividend for 2018. The bank will recognize the fine in its first quarter earnings.

Menefee, who was the head banker on Barclays’s subprime RMBS securitizations, “has always maintained that the government’s FIRREA lawsuit against him was baseless,” his lawyers said in a statement, referring to the statute under which the case was brought. “Solely to put this matter behind him, Mr. Menefee has agreed to a settlement in which he has not admitted any wrongdoing.” Bloomberg