Citgroup Inc has agreed to pay $7bn to resolve a US government investigation into inadequate mortgage-backed securities the bank sold in the run-up to the financial crisis in 2008.
The settlement ends months of negotiations, during which the US government demanded $12bn and threatened to sue Citigroup.
In late April the bank offered $363 million, which the US Department of Justice considered unrealistic.
Citigroup is the second major bank to be hit by authorities after President Obama demanded the formation of a task force to investigate the sale and packaging of toxic home loans, which were at the centre of the 2008 sub-prime crisis.
The US Department of Justice has issued more than a dozen subpoenas to financial institutions since the government demanded the probe.
JPMorgan Chase, the largest bank in the US, settled for $13bn last year.