Banks Have Paid $100 Billion In US Fines Since Financial Crisis: Report
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The world’s largest banks have forked out close to $100 billion to settle U.S.-based legal disputes since the beginning of the financial crisis, according to a research study by the Financial Times.
Last week, Credit Suisse agreed to pay $885 million deal to the Federal Housing Finance Agency, after it was accused of mis-selling mortgage-backed securities during the run up to the financial crisis.
The world’s largest banks have forked out close to $100 billion to settle U.S.-based legal disputes since the beginning of the financial crisis, according to a research study by the Financial Times.
Last week, Credit Suisse agreed to pay $885 million deal to the Federal Housing Finance Agency, after it was accused of mis-selling mortgage-backed securities during the run up to the financial crisis.
This took total bank settlements since 2007 to $99.5 billion, of which $15.5 billion have come from foreign banks.
Due to the long investigative period however, FT noted that over $52 billion of the total was only paid out last year. The settlements and restitutions range from as high as $13 billion, agreed to by JPMorgan Chase in a deal with the justice department, to fines as low as $1 million.
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According to FT, the biggest banks in the U.S. could face another $151 billion bill in the future if they fail to meet up to Federal Reserve stress tests. Lawyers believe the bulk of this estimate is made up of expected litigation costs, suggesting the Fed is concerned that banks have misjudged badly their legal exposure.
Tony Fratto, of Hamilton Place Strategies in Washington, said the fines were “very substantial, in some cases orders of magnitude larger than anything we’ve seen in the past”, as they came on top of higher compliance costs imposed after the crisis.
“If the goal is not to shutter banks, but to impress upon them the public interest in adhering to the law, and to better account for risk, the fines go beyond what was necessary,” he said.
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But other experts claim that the fines have little impact on the larger institutions, who have the capacity to easily absorb such penalties.
[quote] “The fines can be viewed as [a] ‘cost of doing business’,” said Anat Admati, of Stanford University. “They don’t get at the heart of the problem, and aren’t effective to change behaviour, because the strong incentives by individuals within the banks to keep engaging in the same practices remain in place.”[/quote]
