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Barclays Future Shaky After Agreeing To Settle $2bn Fine With DOJ

Barclays, the British banking giant has agreed to pay $2 billion as a settlement after it accepted allegations that it fraudulently sold residential mortgage securities in the lead up to the financial crisis similar to RBS last year.

The US Department of Justice (DOJ) stated the bank's investment arm misled investors over the quality of mortgages on 36 deals which resulted in billions of dollars in losses.

The DOJ reached a settlement with Barclays after it agreed to pay the $2 billion fine. The DOJ also agreed to allow the two former Barclays executives a chance to settle.

John Carroll who headed subprime loan acquisitions and Paul Menefee who was the key banker in charge of the subprime securities will be a total sum of $2 million to settle their cases.

In a statement, Richard Donoghue, the United States Attorney for the eastern district of New York, said

This settlement reflects the ongoing commitment of the Department of Justice, and this Office, to hold banks and other entities and individuals accountable for their fraudulent conduct

Barclays announced that the settlement will be paid out of its first-quarter earnings. This will completely resolve all of the charges involving its dealings with mortgage-based security during the 2005 to 2007 period.

Bloomberg TV Markets and Finance

Barclays Happy To Settle And Move Forward

Dani James and Barry Berke who were the legal representatives for Menefee argued that the accusations against their client was but said that their client wanted to put all of this behind him and hence agreed to the settlement. They note that the payment of the settlement does not mean that he has agreed that he committed any wrongdoing. Carroll’s legal representative also held a similar view.

Barclays' CEO Jes Staley was quite positive about the settlement and thought it was a fair deal. He came forward with a positive view on the future of the bank stating that the bank is now in a good position to increase profits in the future.

For all the optimism, Barclays will have to deal with reality and that makes Barclays one of the most vulnerable banks in the United Kingdom. The bank has an estimated market value of $50 billion and its shares have not done well in recent years making it one of the worst performing shares amongst UK banks.

This settlement by Barclays follows two other large payments made by Deutsche Bank and Credit Suisse over similar dealings. Deutsche Bank paid around $7.2 billion, while Credit Suisse ended up forking over $5.3 billion. The DOJ is still in talks with the Royal Bank of Scotland over a similar settlement.


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