Barclays PLC agreed to pay $2 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 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 credit-worthy than Barclays represented,” the Justice Department said in a statement 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 CEO Jes Staley welcomed the deal in a statement and called it “a fair and proportionate settlement.” The bank will recognize the fine in its first-quarter earnings.
Menefee, who was the head banker on Barclays’ 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.”