The British multinational bank Barclays has agreed to pay the United States $2 Billion to settle a lawsuit over the sale of residential mortgage-backed securities (RMBS).

Pension plans, charitable and religious organisations, university endowments, and others had purchased the securities prior to the global financial meltdown in 2008.  After a three year investigation, the US accused Barclays of a fraudulent scheme involving 36 deals in RMBS initially valued at US$31 Billion.  Prosecutors said the RMBS "were significantly less creditworthy than Barclays represented," and Barclays "intentionally misrepresented" key facts about the mortgages involved, which resulted in billions of dollars in losses.

New York district federal prosecutor Richard Donoghue said, "The substantial penalty Barclays and its executives have agreed to pay is an important step in recognising the harm that was caused to the national economy and to investors in residential mortgage-backed securities."

Barclays did not admit wrong doing.  "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 Barclays chief executive Jes Staley, referring to the settlement as "fair and proportionate". 

Two former Barclays executives who were in charge of subprime loan acquisitions and subprime securities will also pay US$2 Million to settle claims against them.

The settlement made Barclays the latest major bank to be sanctioned for crisis-era fraud nearly a decade after the collapse of major New York financial institutions dealing in mortgage-backed derivatives sparked a global recession.  Last week, Swiss bank UBS agreed to pay $230 Million to New York state, also settling charges the bank had misrepresented the value of mortgages underlying securities sold before the crisis.