Barclays to pay $2b to settle mortgage securities suit

London: Barclays Plc agreed to pay $2 billion (Dh7.34 billion) in civil penalties to settle a US investigation into its marketing of residential mortgage-backed securities between 2005 and 2007.

The investigation targeted 36 RIBS deals involving $31 billion worth of loans, more than half of which defaulted, the Justice Department said in a statement Thursday. 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 creditworthy than Barclays represented,” the Justice Department said in a statement on Thursday.

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 recognise the fine in its first quarter earnings.

Menefee, who was the head banker on Barclays’s sub-prime RIBS securitisations, “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.”