GCC investors involved in high yield strategies tend to benchmark against the Barclays US High Yield Index. Michael Nagle Bloomberg
Barclays agreed Thursday to pay $2 billion to settle a civil lawsuit by the U.S. Department of Justice over the British bank's issuance of residential mortgage-backed securities.
A Barclays sign is seen on the exterior of the Barclays US Corporate headquarters in the Manhattan borough of New York City, May 20, 2015.
Barclays is to pay $2 billion in civil penalties in exchange for dismissal of an amended complaint.
After a three-year investigation, federal prosecutors accused Barclays of a fraudulent scheme from 2005 to 2007 involving 36 deals in RMBS initially valued at US$31 billion.
"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", said United States Attorney Richard Donoghue.
The US said the bank had "systematically and intentionally misrepresented" key characteristics of the loans it included in the RMBS deals in question.
The 2008 Financial Crisis was largely blamed on questionable RMBS practices, which caused investors around the world to lose billions.
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The company said that the penalty will be recognised in the first-quarter of 2018.
The settlement makes Barclays the latest major bank to be sanctioned for crisis-era fraud almost a decade after the collapse of major NY financial institutions dealing in mortgage-backed derivatives sparked a global recession.
The department said the firm misled investors about the quality of the mortgage loans backing those deals and committed violations of mail fraud and bank fraud.
"It has been a priority for this management team from the start to resolve these historic issues in a timely and appropriate manner wherever possible", said CEO Jes Staley.
For RBS, which remains more than 70% taxpayer-owned, a long-awaited settlement will be a hugely significant milestone as the beleaguered bank aims to return to normality by re-starting dividend pay-outs, making it easier to start returning the lender to the private sector.
The bank lied about the creditworthiness of borrowers whose loans underpinned the securities and who then defaulted at "exceptionally high rates", the statement said.
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