Yahoo Finance Defiant Barclays digs in for US battle
Barclays is gearing up for a battle with US prosecutors over its actions during the financial crisis, days after Britain’s Serious Fraud Office pressed charges over an allegedly fraudulent loan to Qatar.
The bank is preparing to face down the Trump administration in court over a possible multi-billion-pound fine for its role in the sub-prime mortgage collapse that rocked the global financial system in 2008. It is working with advisers on a defence, which is expected to argue that the bank is not liable for alleged wrongdoing in the US.
Barclays’ lawyers are planning to question the authority of legislation that has been used by the Department of Justice (DoJ) to punish rivals that were also involved in the disastrous securitised home loans market.
According to senior City sources, Barclays has been advised that its activities were not covered by the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) because the bank’s sub-prime securities did not cause any damage to state interests.
Such a defence would be a serious challenge to the reach of US prosecutors in their efforts to bring banks to book over the sub-prime collapse. In January it used the same legislation to extract a $7.2bn settlement from Deutsche Bank over its role, comprising a $3.1bn fine and $4.1bn in compensation to affected individuals and communities. The settlement allowed Deutsche to avoid a prosecution, but Barclays is believed to be ready to take on the DoJ in court.
The plans will mean Barclays could fight simultaneous prosecutions on both sides of the Atlantic over its actions during the financial crisis. This week the SFO formally charged the bank and four former senior executives over an allegedly fraudulent scheme involving a $3bn loan to Qatar.
It is understood that Barclays is still weighing its plea options in that prosecution. A deferred prosecution agreement, a form of bargain, was recently agreed by the SFO in its investigations of Rolls-Royce and Tesco, but is unavailable to Barclays, which maintains there is no criminality in its dealings with Qatar.
The plans will mean Barclays could fight simultaneous prosecutions on both sides of the Atlantic over its actions during the financial crisis
Barclays held talks with the DoJ over a potential settlement in the US, before charges were announced in December.
The bank is believed to have balked at the scale of the financial punishment demanded by officials, particularly when set against what it viewed as relatively lenient settlements agreed with US institutions. Morgan Stanley sealed a $2.6bn deal with prosecutors.
City sources familiar with Barclays’ position said that, given what it views as relatively limited involvement in sub-prime mortgage securities, an even-handed DoJ would have demanded only $1.5bn to avoid prosecution.
Barclays is now awaiting the US government’s next move, with American officialdom at a standstill as the Trump administration struggles to make appointments. Out of 207 roles at the DoJ only two have been filled, with four more pending approval. There has been no nomination for leadership of the Civil Division behind the sub-prime investigation.
Barclays declined to comment.
