Bank to pay $2 billion penalty over toxic mortgages

Bank to pay $2 billion penalty over toxic mortgages

Bank to pay $2 billion penalty over toxic mortgages

"I am pleased that we have been able to reach a fair and proportionate settlement with the Department of Justice", Barclays CEO Jes Staley said in a statement issued by the bank. The shares erased a drop of nearly 1 per cent after the news, closing 0.2 per cent higher. In 2014, Bank of America agreed to a record-setting $16 billion settlement. According to the Justice Department's statement, Barclays disputes the allegations.

"The settlement is at the bottom end of expectations and has come sooner than expected, so this is a good outcome for Barclays", Ian Gordon, analyst at Investec Bank in London, said.

It is the latest big bank to reach a large financial settlement with USA regulators over MBS mis-selling.

"This is marginally good news, broadly in line with the figure that they are purported to have offered in 2016, prior to the change in USA administration", said Edward Firth, an analyst at Keefe, Bruyette and Woods in London. Additionally, the U.K.'s Serious Fraud Office has charged the firm over its fundraising from the Middle East at the height of the financial crisis.

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 $2 million in fines in exchange for having the charges against them being dismissed.

But Barclays vowed to fight the lawsuit, saying it had an obligation to its shareholders to defend itself against "unreasonable allegations and demand".

Karnataka polls on May 12, counting on May 15
The Congress has picked incumbent Chief Minister Siddharamaiah as its CM face, while the BJP has nominated former CM B.S. The Election Commission announced on Tuesday that Karnataka would go to the polls on May 12 , 2018.

The US had alleged that Barclays caused "billions of dollars in losses to investors" by selling the deals in the lead up to the financial crisis. "Today's settlement holds accountable those who waste, steal or abuse funds in connection with FHFA or any of the entities it regulates".

"Solely to put this matter behind him, Mr. Menefee has agreed to a settlement in which he has not admitted any wrongdoing, ” lawyers representing Menefee said".

Complex financial instruments known as residential mortgage-backed securities (RMBS), which have been blamed for causing the financial crisis, are at the heart of the cases.

The bank lied about the creditworthiness of borrowers whose loans underpinned the securities and who then defaulted at "exceptionally high rates", the statement said.

Barclays' settlement could encourage its rival Royal Bank of Scotland, which has been frustrated by a lack of progress in settling its own case that is blocking the bank from resuming dividend payments.

Related news