Global banks have paid $453b in fines

Total paid since 2008 for various regulatory failings; figure set to rise with tighter rules in Europe, Asia

LONDON • Banks globally have paid US$321 billion (S$453 billion) in fines since 2008 for a range of regulatory failings, from money laundering to market manipulation and terrorist financing, according to Boston Consulting Group (BCG) data.

That tally is set to increase in the coming years as European and Asian regulators catch up with their more aggressive US peers, who have levied the majority of charges to date, BCG said in its seventh annual study of the industry published yesterday.

Banks paid US$42 billion in fines last year alone, a 68 per cent rise on the previous year, the data showed.

"As conduct-based regulations evolve, fines and penalties, along with related legal and litigation expenses, will remain a cost of doing business," analysts led by Mr Gerold Grasshoff wrote.

"Managing those costs will continue to be a major task for banks."

The era of ever-increasing regulatory requirements is here to stay, BCG said, despite US President Donald Trump's pledge to roll back the 2010 Dodd-Frank Act that reshaped US banking in the wake of the collapse of Lehman Brothers.

The number of rule changes that banks must track on a daily basis has tripled since 2011, to an average of 200 revisions a day, according to the report.

"Regulation must be considered a permanent rise in sea level - not just a flowing tide that will ebb or even a cresting tsunami that will recede," the authors wrote. "We expect this theme to hold despite recent political developments in the US."

Almost 10 years after the onset of the financial crisis, the banking industry still has not completely recovered from the losses it suffered by one measure, BCG said.

While finance firms created so-called economic profit of €159 billion (S$236 billion) in 2015, a fifth annual increase, the industry remains €9 billion in the red on a cumulative basis for the years 2009 to 2015, the data showed.

BCG calculated economic profit by taking a bank's operating results and incorporating its cost of capital.

European lenders have not posted an annual economic profit during that time, while US firms have been in the black for the past three years.

Banks in the Asia-Pacific, South America and the Middle East and Africa have posted an economic profit every year.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 03, 2017, with the headline 'Global banks have paid $453b in fines'. Print Edition | Subscribe