Barclays to pay £1.4bn over USA mortgage mis-selling claims

Barclays said the deal resolves all actual and potential claims brought by the Justice Department in 2016 over the bank's sale and packaging of mortgage-backed securities transactions between 2005 and 2007.

The department's civil action against Barclays alleged that the bank caused billions of dollars in losses to investors through a fraudulent scheme to sell 36 bundles of toxic mortgage assets between 2005 and 2007.

Combined, two former Barclays executives named as defendants in the suit agreed to pay $2.0m in civil penalties in exchange for the dismissal of the claims against them.

British bank Barclays became the latest big bank to reach a multi-billion dollar settlement with United States authorities over its role in the subprime mortgage bubble and subsequent financial crisis.

When they couldn't reach an agreement, the Justice Department took the unusual step of suing Barclays in the waning days of the Obama administration. In December 2016 Credit Suisse paid $5.3bn as a settlement and to consumers.

As part of the settlement, the lender acknowledged that home loans it pooled into the securities did not meet underwriting guidelines and that "it knew it was peddling investments that were likely to fail", USA attorney for the eastern district of NY said in a statement announcing the deal.

Federal prosecutor Richard Donoghue assures that this pact reflects USA authorities ' commitment to making all banks pay for "fraudulent behavior" that led to crisis.

"Barclays jeopardized billions of dollars of wealth through practices that were plainly irresponsible and dishonest", she said.

It said that in general, the borrowers whose loans backed the deals were "significantly less creditworthy" than Barclays represented, and the loans defaulted at exceptionally high rates early in the life of the deals.

Last month, Britain's Serious Fraud Office announced charges against Barclays Bank over emergency fundraising from Qatar during the financial crisis - adding to charges against parent company Barclays PLC and four former top executives.

Barclays CEO Jes Staley called it a "fair and proportionate settlement".

"The completion of our restructuring in 2017, and putting significant legacy matters like this one behind us, mean Barclays is well positioned to produce stronger earnings going forward, and to start returning a greater proportion of those earnings to our shareholders over time".

The fine is the latest in a long line of penalties issued by American and British financial watchdogs relating to banks' conduct before the crash in 2008. Barclays shares edged down after the announcement.

Vanessa Coleman