Barclays (BCS) - Get Report said Friday it would fight a U.S. Department of Justice complaint against the bank in relation to its mortgage-backed securities business in the run up to the global financial crisis.
The DoJ filed a suit against the British bank in federal court Thursday, alleging it engaged in fraudulent schemes to sell residential mortgage-backed securities (RMBS) that authorities said were backed by "defective and misrepresented loans." The DoJ said the scheme involved 36 deals backed by $31 billion in sub-prime and so-called 'Alt-A' mortgage loans.
"Barclays rejects the claims made in the complaint," the bank said in a statement Friday. "Barclays considers that the claims made in the complaint are disconnected from the facts." The bank added that it will vigorously defend itself and intends to seek its dismissal at the earliest opportunity.
The DoJ suit also names two Barclays executives—Paul Menefee and John Carroll—in the suit, both of whom authorities said worked in Barclays's subprime lending and securitizatiions unit.
"Financial institutions like Barclays occupy a position of vital public trust," said Attorney General Loretta Lynch. "Ordinary Americans depend on their assurances of transparency and legitimacy, and entrust these banks with their valuable savings. As alleged in this complaint, Barclays jeopardized billions of dollars of wealth through practices that were plainly irresponsible and dishonest. With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people."
The filing comes amid two significant settlement agreements for the DoJ with European lenders over claims that mortgage bonds were mis-sold in the 2005 to 2007 time period in the United States.
Deutsche Bank (DB) - Get Report agreed a $7.2 billion settlement that includes $3.1 billion in civil penalties while Credit Suisse (CS) - Get Report agreed to pay $5.3 billion to cover both civil penalties and customer relief.
Barclays shares closed at 227.41 pence each in London Thursday, up 0.18% on the session, extending their three-month gain past 31.3%.