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Investor Alert

March 29, 2018, 10:08 a.m. EDT

Barclays to pay $2 bln to settle U.S. fraud claims

By Adam Clark

The U.S. Department of Justice said on Thursday that Barclays PLC has agreed to pay $2 billion in civil penalties to resolve claims for fraud in the sale of residential mortgage-backed securities, or RMBS.

The Department of Justice said the settlement will dismiss the 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.

The filed complaint alleged that Barclays systematically and intentionally 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.

Barclays said it will recognize the penalty in its first-quarter results for 2018, resulting in a 45 basis points hit to its common equity tier one ratio. The bank said that it remains well positioned to produce stronger earnings going forward and still intends to pay a 6.5 pence a share dividend for 2018.

Shares at 1324 GMT were up 0.40 pence, or 0.2%, at 206.40 pence.

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