Daily Management Review

Major banks paid $ 321 billion fines since 2008


Since 2008, banks around the world have paid $ 321 billion in the form of fines for various violations of the law, from money laundering to market manipulation and financing of terrorism, according to Boston Consulting Group.

This amount will only be increasing in the coming years, as European and Asian watchdogs are catching up with their American counterparts, who are more stringent and by now have collected most of the said fines, according to BCG’s seventh annual study.

Only in 2016 the banks paid $ 42 billion of penalties, which is 68% higher than a year earlier.

Business will continue to deal with fines, as well as with associated legal and court costs, write analysts led by Gerold Grasshoff. "To manage these costs will remain a major challenge for the banks", - they say.

President Donald Trump previously promised to abolish The Dodd — Frank Act, which changed the requirements for banks after collapse of Lehman Brothers Holdings Inc. Despite this, the period of ever-increasing regulatory requirements continues, says BCG. Number of changes in the rules, on which banks have to keep track daily, has increased three-fold since 2011, to an average of 200 per day, according to the report.

"As the rules of behavior will evolve, fines, penalties, as well as related legal and court costs will remain the price of doing business ... Regulation of these expenses will be one of the main tasks of banks", - commented BSG.

Morgan Stanley’s study in August 2015 said that the five largest banks in the US and twenty European banks have paid $ 260 billion of penalties since the financial crisis of 2007-2008. In the next two years, according to the forecast of MS, these costs would increase by $ 60 billion The largest legal fees were applied to BofA ($ 65,6 billion), JPMorgan ($ 42,4 billion) and British Lloyds (26,6 billion pounds).

There has been nearly 10 years after the financial crisis, yet the banking sector has not yet fully recovered from the loss, says BCG.

Financial companies received so-called economic profit of € 159 billion ($ 167 billion) in 2015, registering the fifth annual increase. However, the industry maintains a loss of € 9 billion on a cumulative basis from 2009 to 2015. BCG calculates economic profit based on results of banking operations, including cost of capital.

European lenders during this time has not recorded annual economic profit, while American firms operated without losses in the past three years. Banks of Asia Pacific, South America, Middle East and Africa have been receiving economic benefits each year.

source: bloomberg.com

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