Barclays is being sued by the US Department of Justice over alleged fraud in the sale of mortgage securities in the run-up to the financial crisis, after failing to agree a settlement.

The civil lawsuit accuses the bank of repeatedly deceiving investors about the quality of loans underlying the tens of billions of dollars worth of mortgage securities sold between 2005 and 2007.

Barclays is among a number of banks that has been under investigation over misconduct.

US lenders including JPMorgan Chase and Bank of America have already settled with authorities over their actions, while the US Justice Department is still in negotiations with Deutsche Bank about a possible settlement.

Barclays American depositary receipts, traded in New York, fell almost 2pc after the lawsuit was disclosed.

The Justice Department claims that more than half of the $31bn in mortgages underlying the Barclays securities ended in default, causing investors to lose “many billions of dollars, with hundreds of millions more in losses projected during the remaining life of the deals”.

Barclays said it rejected the claims and had “an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands”.