Fines & Penalties Monitor: January 2016

February 08, 2016 at 2:00 PM

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Source: BCG analysis for the years 2009 to 2014. CPG analysis for the year 2015 and YTD 2016.

  1. Peer group of the 18 largest U.S. & E.U. banks includes the following 6 U.S. banks: Bank of America, JPMorgan Chase, Citigroup, Morgan Stanley, Wells Fargo, and Goldman Sachs, and the following 12 E.U. banks: BNP Paribas, Credit Suisse, Deutsche Bank, UBS, HSBC, Barclays, The Royal Bank of Scotland, Rabobank, Lloyds Bank, Standard Chartered, ING, and Banco Santander. Data only includes fines, penalties, and settlements of $50 million or greater.

One might assume that the beginning of a new year would be a slow time for fines, penalties and settlements. After all, the first few weeks of 2016 were relatively quiet. As earnings season kicked off, however, it became clear that the lull was only temporary.

Our large bank group – the 18 largest institutions headquartered in the U.S. and E.U. – announced a total of roughly $10 billion in penalties in January. Goldman Sachs led the way after reaching an agreement in principle with the Residential Mortgage-Backed Securities Working Group related to claims concerning the bank’s securitization, underwriting, and sale of RMBS in the years leading up to the financial crisis.  Between a civil money penalty and consumer relief, the agreement will cost Goldman a little over $5.0 billion. JPMorgan Chase and RBS also reported significant settlements related to allegations involving past activities in the RMBS market, costing $2.4 billion and $2.2 billion, respectively.

With four weeks down and 48 more to go, it is too early to make any predictions about the level that fines, penalties, and settlements will reach by December 31st. Nevertheless, one can rest assured that the resolution of issues related to the financial crisis will continue to impact large bank earnings.

 

Eileen Sullivan

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